BlackRock Goes All-In: Ethereum Spot ETF Filing Confirms In-Kind Creation Model

The $10 trillion gorilla just swung for the fences—BlackRock’s amended Ethereum ETF filing reveals plans for in-kind creations, sidestepping cash settlements that plagued Bitcoin ETFs.

Why it matters: This isn’t your grandma’s crypto fund. The in-kind model lets institutions swap ETH directly for shares, avoiding taxable events and liquidity crunches that make traditional finance types break out in cold sweats.

The fine print: SEC still holds the cards, but Wall Street’s playing with house money now. Funny how ’risky’ assets suddenly look appealing when there’s a 30-basis-point management fee attached.

BlackRock Presses SEC For Crypto ETF In-Kind Redemption

On May 9, BlackRock filed an amendment to the S-1 form of the Ethereum spot ETF ETHA that would permit an in-kind creation and redemption process for the fund. 

For context, crypto spot ETFs generally operate a cash creation and redemption process where authorized participants exchange cash for shares of an ETF. At the point of redemption, these shares are returned for the equivalent of their cash value. 

However, in an in-kind system, shares are directly exchanged for the base cryptocurrency between investors and the ETF issuers. This system allows ETF issuers to directly increase their cryptocurrency holdings without parting ways with any available cash. 

According to Bloomberg analyst James Seyffart, BlackRock’s application represents the first to push for in-kind creation/redemption in Ethereum ETFs after the asset manager filed a similar one for the iShares Bitcoin Trust ETF in January 2025. Notably, there is a final deadline around November 10, 2025, at which the SEC is expected to give a definite response to this proposed change on BlackRock’s ETHA.

Risks With In-Kind Creation/Redemption System

In BlackRock’s S-1 amendment for an in-kind creation/redemption system, the asset manager highlights multiple risks, which can be described as the conventional risks all investors should know before directly or indirectly engaging with the crypto market. 

In particular, James Seyffart draws attention to a whole paragraph on the risk of Quantum computing. Here, BlackRock warns that significant advancements in Quantum computing in the coming years might provide opportunities to attack the cryptographic algorithm of digital assets such as  bitcoin or Ethereum, thereby undermining the assets’ security. 

Although there are steps by certain network members to create a cryptographic algorithm that WOULD be immune to Quantum computing developments, there is little evidence to show that such Quantum-proof systems can be completely built or even implemented without causing network forks. 

However, Seyffart tells investors that there is no cause for alarm; these are part of the basic risks of digital assets, which BlackRock is mandated to disclose. Other dangers mentioned in the amendment proposal include potential exchange collapse, e.g, FTX, governance policy, and volatility.

At press time, Ethereum continues to trade at $2,347 following a 28.38% gain in the past week. Meanwhile, the altcoin is up by 48.38% on its monthly chart amidst a general crypto market resurgence.