Cboe has submitted amendments for five crypto-related exchange-traded funds (ETFs) that would allow authorized participants to create and redeem shares in-kind, which is a positive sign for the approval of such funds.

Bloomberg ETF analyst James Seyffart shared on July 22 a screenshot of the exchanges’ docket showing the amended rule filings. The amendments relate to issuers ARK 21Shares, VanEck, Fidelity, WisdomTree, and Invesco Galaxy.

Seyffart described the cluster of filings as a “positive” signal that the Securities and Exchange Commission (SEC) is working with issuers to finalize an in-kind framework rather than resisting it. He characterized the process as fine-tuning, not stonewalling.

In-kind redemptions enable investors to exchange Bitcoin (BTC) or Ethereum (ETH) for the underlying assets, rather than cash, and receive them upon redemption.

Not noticeable by the retail

Seyffart also addressed a recurring misconception. The shift to in-kind would not let retail investors swap ETF shares for Bitcoin or Ethereum directly. 

Only authorized participants, such as large Wall Street firms and market makers, would be responsible for handling those transfers. For most investors, nothing will appear different on the screen because existing spot Bitcoin ETFs already trade closely to their net asset value.

The benefit is then structural, as crypto ETPs would be treated the same way as commodity and equity products that commonly use in-kind flows, enhancing tax efficiency and lowering friction inside the fund.

If the Commission signs off, authorized participants will be able to move crypto directly instead of sourcing or unwinding large cash positions each time they create or redeem baskets. 

That change could reduce spreads and hedging costs, especially in volatile markets, and give issuers more flexibility in portfolio management. 

Although retail wouldn’t notice the changes directly, smoother primary-market plumbing tends to reinforce secondary-market efficiency.

Long queue

The latest Cboe batch joins a growing queue of filings that either request or contemplate in-kind flexibility. 

Nasdaq has already requested that BlackRock’s iShares Bitcoin Trust be converted to in-kind creations and redemptions, following language in the trust’s January 2024 S-1 that stated the sponsor could make the switch once regulators approved. 

A Federal Register notice in late May also described full in-kind mechanics for an Ethereum trust on Nasdaq, detailing how APs would deliver or receive ether. 

NYSE Arca hosts Bitwise’s Bitcoin and Ethereum ETFs, which from the outset proposed pure in-kind baskets. 

Collectively, these filings form the pending docket the SEC must clear before any fund can move away from the cash-only model imposed at launch.

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As Republicans rush to pass President Donald Trump’s “One Big Beautiful Bill” budget plan, a timely initiative is emerging in Congress that puts cryptocurrency in the spotlight once more.

Lawmakers are seeking to attach amendments aimed at providing significant advantages for cryptocurrency investors, contributing to the ongoing shift in the regulatory landscape for digital assets in the country.

Fair Tax Treatment For Crypto Miners And Stakers

On Monday, Senator Cynthia Lummis, an advocate for the adoption of digital assets, took to social media platform X (formerly Twitter), to voice her concerns about the current tax treatment faced by crypto miners and stakers. 

The Senator highlighted that these individuals are taxed twice: once when they receive block rewards and again upon selling their assets. “It’s time to stop this unfair tax treatment and ensure America is the world’s Bitcoin and Crypto Superpower,” Lummis stated.

This sentiment resonates with President Trump, who has consistently supported the integration of digital assets into the country’s financial system. His administration has proposed the establishment of the nation’s first crypto strategic reserve, which would include Bitcoin (BTC) and other tokens as part of its framework.

Fox journalist Eleanor Terret also reported on X that discussions around crypto tax amendments remain alive, despite some disagreements that arose over the weekend. 

Congressional Divisions Toward Digital Assets

Terret indicated that the White House is advocating for the inclusion of Lummis’s proposed changes in the final version of the bill, demonstrating a concerted effort to galvanize support for the cryptocurrency sector.

In contrast to Lummis’s approach, Senator Jeff Merkley introduced an amendment aimed at barring elected officials from promoting or profiting from crypto tokens in which they have a financial interest. 

Merkley argued that allowing such practices undermines the integrity of governance. “The sale of crypto coins by any of us for financial benefit is corrupting our responsibility to govern by and for the people,” he asserted.

Lummis opposed Merkley’s amendment, warning that it could stifle American innovation and hinder the government’s ability to effectively understand and regulate digital assets. 

In a pointed remark in Congress on Monday, the pro-crypto Senator noted, “If we’re serious about ethics and financial products, let’s focus on real solutions and all financial products, not just digital.”

Ultimately, Merkley’s amendment was defeated, failing to pass with a vote of 47 to 53, reflecting the ongoing tensions in Congress regarding the regulation of digital assets, as well as the divisions among lawmakers regarding this emerging technology.

As of press time, Bitcoin trades at $107,187, up 2% on the weekly time frame. Despite the short-term recovery for the market’s leading crypto, BTC still trades 4% below its record price of $111,800.  

Featured image from DALL-E, chart from TradingView.com 

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