Cboe BZX Exchange Inc. Amendment

Cboe BZX Exchange Inc. has filed amendments to permit in-kind redemptions for spot Bitcoin and Ethereum exchange-traded funds.

The equities exchange submitted an amended rule filing on Monday to enable in-kind creations and redemptions for the ARK 21Shares Bitcoin ETF and the 21Shares Core Ethereum ETF. This action follows a similar move by Nasdaq on behalf of BlackRock for its iShares Bitcoin Trust.

According to the filing, “The Exchange proposes to amend the ARK 21Shares Bitcoin ETF (the ‘Bitcoin Trust’) and the 21Shares Core Ethereum ETF (the ‘ETH Trust’ and, collectively with the Bitcoin Trust, the ‘Trusts’), shares of which have been approved by the Commission to list and trade on the Exchange pursuant to BZX Rule 14.11(e)(4), to permit in-kind creations and redemptions.”

In anticipation of the U.S. Securities and Exchange Commission’s (SEC) approvals for spot bitcoin ETFs over a year ago, firms were discussing technical details for the redemption process. Initially, the SEC favored a cash model where issuers would sell bitcoin from storage and return the cash to the investor.

However, the SEC approved spot bitcoin ETFs with in-kind redemptions in January 2024, followed by spot Ethereum ETFs in May. It’s important to note that individual investors will not be able to perform “in-kind” redemptions; this process will only apply to authorized participants, as explained by James Seyffart, Bloomberg Intelligence ETF analyst, in a post on X.