SEC Acknowledges In-Kind Redemption for BlackRock Ethereum ETF

The U.S. Securities and Exchange Commission (SEC) has officially acknowledged BlackRock’s proposal to enable in-kind redemptions for its spot Ethereum exchange-traded fund (ETF). This key development indicates the SEC is currently reviewing the request, but approval is not yet guaranteed.

In-kind redemptions allow ETF issuers to deliver actual ETH rather than cash when investors redeem shares. This method is favored over the in-cash model due to its improved efficiency and cost-effectiveness. However, only authorized participants are permitted to execute these transactions.

BlackRock submitted the in-kind redemption request on May 13, coinciding with a similar delayed decision for its spot Bitcoin ETF. The SEC had previously required BlackRock to remove in-kind redemptions from both its Bitcoin and Ethereum ETF filings in December 2023.

This recent acknowledgment follows growing optimism around Ethereum ETFs and broader regulatory acceptance. Earlier this year, the SEC made similar moves with spot Bitcoin ETFs, signaling a gradual shift in approach. The success of BlackRock’s Bitcoin ETF, with substantial inflows and market traction, may be influencing the agency's stance.

Commissioner Hester Peirce, a long-time crypto advocate, has expressed openness to revisiting the in-kind model following the exit of former SEC Chair Gary Gensler. She emphasized the need for flexible product design that prioritizes investor utility and market efficiency.

If approved, in-kind redemptions could enhance operational efficiency for BlackRock’s ETH ETF and pave the way for a broader acceptance of crypto ETFs with improved investor mechanisms.

As Ethereum ETF anticipation grows, the SEC’s ongoing review of in-kind redemption models marks a potentially pivotal moment for institutional crypto adoption in the U.S. market.