Seeking to refine its proposed spot Ethereum exchange-traded fund (ETF), investment giant BlackRock has submitted revised documentation to the U.S. Securities and Exchange Commission (SEC). This updated filing for the iShares Ethereum Trust introduces significant modifications aimed at enhancing the fund’s structure and potential functionality.
Key Proposed Changes to the Ethereum ETF Structure
A central element of the updated proposal involves the mechanism for share redemptions. BlackRock is seeking approval to allow for in-kind redemptions. This means that, unlike traditional cash redemptions where investors receive U.S. dollars, authorized participants could potentially redeem their shares directly for the underlying Ethereum (ETH).
Advocates suggest this model could offer several advantages:
- Improved liquidity for the ETF.
- Enhanced transparency in the redemption process.
- Greater operational efficiency for the fund manager.
- Potential pathway to incorporating Ethereum staking features.
Discussions on Staking and Regulatory Approval
Alongside the filing amendments, BlackRock representatives, including Robert Mitchnick, the firm’s Head of Digital Assets, engaged in discussions with the SEC’s relevant divisions. A key topic was the feasibility of integrating Ethereum staking within the ETF framework. Staking involves locking up ETH to help secure the network, earning rewards in return. Mitchnick previously described the potential inclusion of staking in ETFs as a potential “quantum leap” for the industry.
The dialogue also touched upon the broader standards for approving cryptocurrency-based funds and the technical requirements needed to potentially launch options trading on crypto ETFs, considering aspects like position limits and market liquidity.
Additional Filing Updates and Custody Arrangements
The updated filing submitted to the SEC and Nasdaq also details other modifications:
- The addition of a new custodian for the fund’s assets, supplementing the existing arrangement with Coinbase Custody Trust Company.
- A change in the fund’s official name, although the new designation has not yet been made public.
- Revisions to the procedures governing the creation and redemption of ETF shares.
Coinbase Custody Trust Company remains the custodian for the Ethereum assets, while Bank of New York Mellon continues to serve as the custodian for the fund’s cash holdings.
Regulatory Landscape and Industry Calls for Clarity
This move by BlackRock comes amidst ongoing regulatory deliberation. The SEC has previously postponed decisions regarding staking in Grayscale Investments’ proposed Ethereum ETF and on in-kind redemption models proposed by VanEck and WisdomTree, pushing deadlines potentially into mid-2025. Reflecting the industry’s desire for clear guidelines, the Crypto Council for Innovation, along with nearly 30 crypto firms, recently appealed to SEC Commissioner Hester Peirce for greater regulatory clarity concerning staking rules.
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