The race to launch a spot Ethereum ETF in the United States is gaining momentum, with BlackRock taking a significant step forward by amending its S-1 registration for the iShares Ethereum Trust (ETHA). The update, filed with the U.S. Securities and Exchange Commission (SEC), introduces language supporting in-kind creation and redemption—a move that could enhance efficiency, reduce costs, and strengthen institutional confidence in Ethereum-backed financial products.
This strategic revision follows a recent meeting between BlackRock and the SEC’s Crypto Task Force, signaling ongoing dialogue between regulators and major financial institutions. Market observers interpret the change as a strong indicator that approval for in-kind processing may be on the horizon—potentially as early as 2025.
"Amended S-1 just dropped for BlackRock's Ethereum ETF — $ETHA. Looks like the main change is added language around allowing for in-kind creation/redemption when approved by the SEC."
— James Seyffart, ETF Analyst
What Is In-Kind Creation and Redemption?
In traditional ETF structures, in-kind transactions are standard practice. Instead of exchanging cash for shares, authorized participants (APs) deliver underlying assets—such as stocks or, in this case, Ethereum—to create new ETF shares. Conversely, when redeeming shares, they receive the actual asset back rather than cash.
With the updated filing, BlackRock proposes enabling this same mechanism for ETHA:
“The Trust may allow for an in-kind creation and redemption process as an alternative to the Trust’s current cash creation and redemption process.”
This means investors could:
- Create ETF shares by depositing ETH directly into the trust.
- Redeem shares in exchange for actual Ethereum tokens.
👉 Discover how next-generation ETF models are reshaping digital asset investing.
Why In-Kind Matters: Efficiency, Tax Benefits, and Price Accuracy
The shift from a purely cash-based model to one that supports in-kind transfers brings several key advantages:
1. Lower Transaction Costs
In a cash-based system, ETF issuers must buy or sell Ethereum on the open market to fulfill creations or redemptions. These trades incur trading fees, slippage, and execution risks—especially during volatile periods. In-kind processing eliminates the need for market transactions, reducing friction and cost.
2. Reduced Tax Implications
Selling ETH to settle redemptions triggers taxable capital gains events. By using in-kind redemptions, the trust avoids selling ETH altogether, preserving after-tax returns and making the fund more tax-efficient—particularly important for long-term institutional holders.
3. Tighter Tracking of Ethereum’s Market Price
An in-kind model ensures the ETF’s holdings remain closely aligned with its net asset value (NAV). Without constant buying and selling pressure, price deviations between the ETF and spot ETH are minimized, improving accuracy and investor confidence.
BlackRock Reinforces Commitment with Major ETH Purchase
Shortly after submitting the amendment, BlackRock acquired 7,976 ETH, valued at approximately $18.9 million** at the time. This purchase increased the total holdings of the iShares Ethereum Trust to over **1 million ETH**, worth an estimated **$2.9 billion.
This positions BlackRock as one of the largest institutional holders of Ethereum, second only to Grayscale’s Ethereum Trust (ETHE). The timing of the acquisition—immediately following regulatory progress—underscores strong conviction in Ethereum’s long-term value proposition.
Institutional Demand for Ethereum Is Surging
BlackRock isn’t alone in signaling bullish sentiment. Abraxas Capital Management recently moved 138,511 ETH (worth ~$333 million) off centralized exchanges—a move typically associated with long-term holding strategies. Such actions reflect growing confidence among large-scale investors in Ethereum’s role as a foundational digital asset.
Meanwhile, Ethereum’s price has responded positively:
- Current price: $2,464 (CoinMarketCap)
- +6.52% over 24 hours
- +34.97% weekly gain
- Nearly 70% increase in the past month
These figures highlight both market momentum and increasing investor appetite ahead of potential ETF approvals.
Broader Regulatory Context: SEC Engagement and Industry Impact
Beyond introducing in-kind functionality, BlackRock’s updated S-1 filing integrates disclosures from its Annual Report, enhancing transparency and aligning more closely with SEC expectations. This refinement strengthens the overall credibility of the registration process.
The amendment arrives amid broader discussions between the SEC and multiple ETF issuers regarding:
- Staking mechanisms
- Tokenization of assets
- Regulatory frameworks for crypto-linked products
If the SEC approves in-kind processing for ETHA, it could set a precedent for other applicants—including Fidelity, ARK Invest, and Franklin Templeton—to adopt similar models in their own Ethereum ETF proposals.
👉 See how institutional adoption is accelerating across the crypto ecosystem.
Frequently Asked Questions (FAQ)
Q: What is an in-kind creation and redemption?
A: It’s a process where authorized participants exchange actual Ethereum (rather than cash) to create or redeem ETF shares. This reduces trading costs, tax liabilities, and improves tracking accuracy.
Q: Why is BlackRock’s filing amendment important?
A: It signals progress toward regulatory approval and shows that major financial institutions are aligning their crypto products with traditional financial standards—boosting legitimacy and investor trust.
Q: How does in-kind redemption affect taxes?
A: It avoids forced ETH sales by the fund, eliminating unnecessary capital gains events and preserving value for shareholders.
Q: Is BlackRock’s Ethereum ETF already approved?
A: Not yet. The S-1 amendment is part of an ongoing registration process. Final approval depends on SEC review and regulatory clarity around cryptocurrency products.
Q: How much Ethereum does BlackRock now hold?
A: Over 1 million ETH (~$2.9 billion), making it one of the largest institutional holders globally.
Q: Will other firms follow BlackRock’s in-kind model?
A: Likely. If approved, the structure could become an industry standard due to its operational efficiency and tax advantages.
The Road Ahead for Ethereum ETFs
While no final decision has been made by the SEC, BlackRock’s proactive adjustments suggest that approval timelines may be drawing closer. The combination of regulatory engagement, structural refinement, and tangible asset accumulation paints a picture of serious preparation—not speculation.
Moreover, enabling in-kind processing would bring Ethereum ETFs in line with conventional asset management practices, easing integration into mainstream portfolios. As more institutions explore exposure to digital assets through regulated vehicles, efficient structures like ETHA could become cornerstones of crypto adoption in traditional finance.
👉 Explore how regulated crypto investment products are evolving in 2025.
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