The Cboe BZX Exchange has proposed changes to the ARK 21Shares Bitcoin ETF (ARKB) and the 21Shares Core Ethereum ETF (CETH) to allow in-kind creations and redemptions, an initiative subject to approval by the US Securities and Exchange Commission (SEC).

This filing, known as 19b-4, was submitted on January 27 and would only apply to Authorized Participants (AP) for in-kind transactions.

The proposed rule change aims to streamline the creation and redemption process of ETF shares using assets such as Bitcoin or Ethereum instead of cash. Authorized Participants would exchange these assets for ETF shares, helping to maintain the ETF's price alignment with its underlying assets while reducing costs and taxable events for investors.

Cboe BZX Exchange seeks SEC approval to enable in-kind creations and redemptions for the ARK 21Shares Bitcoin ETF and the 21Shares Core Ethereum ETF. This move follows similar applications by Nasdaq on behalf of BlackRock for the iShares Bitcoin Trust.

According to Bloomberg analyst James Seyffart, the adoption of in-kind creations and redemptions could enhance the efficiency of ETF trading by streamlining the process with fewer steps and parties involved. This model is commonly used by ETFs and should have been allowed from the outset, as Seyffart pointed out.

The Bitcoin and Ethereum ETFs received SEC approval in January and May 2024 respectively, with IBIT and Grayscale Ethereum Trust (ETHE) noted as top performers in the market.

Data from SoSo Value indicates that the ARK 21Shares Bitcoin ETF is the fourth-largest Bitcoin ETF with a cumulative net inflow of $2.91 billion and total net assets of $5.10 billion. It holds a 0.25% share of the total Bitcoin market.

Similarly, the 21Shares Core Ethereum ETF ranks as the 8th largest Ethereum ETF with a cumulative net inflow of $11.40 million and net assets of $16.77 million as of January 27.