BlackRock Files to Enable In-Kind Creation and Redemption of iShares Ethereum Trust (ETHA) Shares

BlackRock has filed an amendment to its S-1 registration for the iShares Ethereum Trust (ETHA), seeking to enable in-kind creation and redemption of ETF shares

Investment firm BlackRock has filed an amendment with the Securities and Exchange Commission (SEC) to enable in-kind creation and redemption of ETF shares for its iShares Ethereum Trust (ETHA) ETF.

The amendment, filed on August 28, modifies a previous S-1 registration and pertains to the proposed ETHA ETF. The amendment seeks to introduce an in-kind mechanism, allowing authorized participants to exchange ETF shares directly for Ethereum (ETH).

This direct exchange would bypass the need for cash transactions, which are currently used for creating or redeeming ETF shares. The amendment highlights the intent to enhance tax efficiency, reduce trading costs, and improve liquidity.

Direct ETH Transactions for Tax Efficiency and Low Trading Costs

The proposed in-kind process aims to defer capital gains taxes and reduce trading costs. It also focuses on tracking the underlying asset’s market price efficiently.

The ETHA ETF, set to track the performance of ETH, is currently structured for cash-based creation and redemption of ETF shares. This involves authorized participants buying or selling ETH in the market to facilitate ETF share creation or redemption.

The proposed in-kind model permits authorized participants to create or redeem ETF shares by exchanging them for ETH. This direct transaction streamlines operations and potentially offers cost benefits.

The SEC’s approval of this in-kind mechanism for crypto ETFs is pending. If granted, it would mark a significant shift in ETF operations involving cryptocurrencies.

Earlier this week, reports revealed that BlackRock had acquired approximately 7,976 ETH, valued at around $18.9 million, at an average price of $2,370.

This addition brings BlackRock’s total Ethereum holdings to over 1 million ETH, valued at approximately $2.9 billion, considering the current market price of around $2,880 for ETH.

Additionally, investment firm SEB Varde, in partnership with BENCHMARK, has launched the world’s first fully-collateralized tokenized multi-asset credit fund on the Ethereum blockchain.

The fund, named SEB Varde Multi-Asset Credit Fund, is designed to provide investors with broad exposure to investment grade private credit across multiple asset classes and geographies.

The fund is also fully collateralized, meaning that each token is backed by a corresponding asset in the fund’s portfolio. This provides investors with an additional layer of protection and transparency.