Home Crypto Events CBOE Seeks SEC Approval for In-Kind Bitcoin and Ethereum ETF Transactions

CBOE Seeks SEC Approval for In-Kind Bitcoin and Ethereum ETF Transactions

Bitcoin Ethereum ETF updates

The CBOE BZX Exchange has formally filed a 19b-4 request with the U.S. Securities and Exchange Commission (SEC) to amend the structure of its Bitcoin and Ethereum exchange-traded funds (ETFs). This request, made public by ETF Store President Nate Geraci, aims to allow in-kind creations and redemptions for the 21Shares Core Ethereum ETF and ARK 21Shares Bitcoin ETF.

If the SEC grants approval, these changes would streamline the process for these ETFs, already authorized for trading under BZX Rule 14.11(e)(4). In-kind transactions would permit authorized participants (APs) to exchange ETF shares directly for the underlying assets—Bitcoin or Ethereum—without involving cash transactions. This method could improve efficiency, reduce transaction costs, and simplify the creation and redemption processes by removing the need for the digital assets to be sold first.

Targeting Institutional Participants

The amendments in question are focused on institutional participants (APs), excluding retail investors. By allowing APs to swap ETF shares for the underlying crypto assets directly, the in-kind process is expected to create a more efficient method for institutional investors to engage with these ETFs.

One key advantage of this proposal is the potential reduction in transaction complexity and associated costs. By eliminating the need for intermediaries or asset sales, the process of creating and redeeming shares becomes more straightforward. Experts suggest this could result in a smoother market experience by bridging the gap between the ETF structures and the broader cryptocurrency markets.

SEC’s Approach to 19b-4 Filings

The SEC has been cautious with 19b-4 filings related to cryptocurrency ETFs in the past. CBOE BZX Exchange has submitted multiple filings previously, but not all of them received approval. For instance, the SEC rejected two proposals for spot Solana ETFs, which were subsequently removed from the exchange’s listings.

Discussions between the SEC and ETF issuers often revolve around the classification of cryptocurrencies as securities. In past regulatory proceedings, the SEC has argued that Solana falls under its jurisdiction, classifying it as a security. Similar discussions may arise for other digital assets as the SEC reviews future filings.

Once accepted, 19b-4 filings are published in the Federal Register, starting the formal regulatory review process. While the SEC has approved some cryptocurrency-related filings, such as those for Bitcoin ETFs, its stance on new filings remains cautious.

Promoting Institutional Engagement

Industry insiders have responded to the filing with mixed opinions. Some believe it signals greater institutional interest in cryptocurrency markets, potentially ushering in a new era of financial products tied to digital assets. By enabling more flexibility for institutional participants, the CBOE hopes to foster a more efficient and liquid crypto market.

The SEC’s approval of options trading on Bitcoin ETFs in October 2024 was seen as a significant regulatory shift, allowing for increased market participation. Despite this, not all filings have been successful, as seen with the exclusion of the Grayscale Bitcoin Mini Trust from the approved list of Bitcoin ETFs.

As the SEC continues to deliberate on its approach to cryptocurrency ETFs, this latest filing from CBOE could mark a new step toward greater institutional adoption and market efficiency. Should the SEC approve the changes, it could enhance liquidity, reduce costs, and improve the overall experience for institutional investors dealing with Bitcoin and Ethereum ETFs.

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Sakamoto Nashi

Nashi Sakamoto, a dedicated crypto journalist from the Virgin Islands, brings expert analysis and insight into the ever-evolving world of cryptocurrencies and blockchain technology. Appreciate the work? Send a tip to: 0x4C6D67705aF449f0C0102D4C7C693ad4A64926e9

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