BlackRock’s Ethereum ETF Play: A Tax Dodge Wrapped in Blockchain Hype?

Wall Street’s favorite trillion-dollar vampire squid just found a new loophole—and it’s dripping with ETH.

BlackRock’s latest ETF amendment reveals a slick in-kind creation/redemption model that could let institutional investors skirt capital gains taxes. Because what’s innovation without a side of creative accounting?

The move signals growing crypto maturity—or just Wall Street doing what it does best: repackaging assets with juicier tax treatment. Either way, the SEC’s inbox just got more interesting.

• BlackRock aims to improve liquidity and reduce trading costs in Ethereum ETFs.
• Ethereum price surges as BlackRock boosts its ETH holdings.
• SEC decision on in-kind creation expected by end of 2025.

BlackRock has submitted an S-1 application to the US Securities and Exchange Commission (SEC) to amend its spot ethereum ETF(ETHA). This amendment seeks to introduce an in-kind creation and redemption process for the ETF. This comes after BlackRock’s recent talks with the SEC’s Crypto Task Force, which demonstrates increased institutional interest in Ethereum.

NEW: 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.

(@EricBalchunas & I expect SEC approval for in-kind at some point this year) pic.twitter.com/HWkTfrDNsJ

The in-kind creation and redemption process enables traders to directly exchange Ethereum (ETH) for ETF shares without the need for cash. These in-kind processes will improve liquidity, reduce trading costs and improve the accuracy to track the price of Ethereum. Under the amendment, those participants will not be liable to pay the capital gains tax as they exchange ETH for the ETF shares .

This S-1 application is part of BlackRock’s efforts to strengthen its position in the Ethereum ETF market. BlackRock’s in-kind process comes amid similar amendments filed by other issuers like Invesco Galaxy, VanEck and WisdomTree. These applications seek to increase crypto ETFs effectiveness because it eliminates creation and redemption of shares which requires cash payments.

Ethereum Price Action

BlackRock’s submission comes a few days after its latest acquisition of 7,976 ETH worth about $18.9m. This demonstrates BlackRock’s confidence in the potential of Ethereum. BlackRock currently holds more than 1 million ETH worth $2.9 billion which makes it the largest corporate holder of Ethereum.

Ethereum price has seen a major increase in recent weeks. ETH experienced a 6.52% increase in the last 24 hours to trade at $2,464. Over the past seven days, Ethereum’s price has seen a 34.97% rise which indicates increased investor Optimism and higher demand in the market.

SEC Reviews In-Kind Redemption on Ethereum ETFs 

Industry experts predict the SEC will approve the in-kind redemption request for Ethereum and Bitcoin ETFs before the end of 2025 despite the current delays. The approval of in-kind creation and redemption procedures would streamline crypto ETF operations.

Furthermore, BlackRock has filed to amend its bitcoin product, IBIT. The amendments include better disclosures about the effects of quantum computing on Bitcoin’s cryptographic protection. 

The outcome of the SEC review of the submissions from BlackRock, Grayscale and Fidelity could define the future of crypto ETFs. The applications focus on the inclusion of staking in Ethereum ETFs and approval of the in-kind creation and redemption process.