Cboe Proposes In-Kind Redemptions for Invesco Galaxy Bitcoin and Ethereum ETFs Amid SEC Review and Recent Outflows

The Cboe BZX Exchange has filed a proposal with the U.S. Securities and Exchange Commission (SEC) on behalf of Invesco Galaxy to allow in-kind creations and redemptions for its spot Bitcoin and Ethereum ETFs. This move aims to streamline the trading process by allowing the direct exchange of the underlying assets for ETF shares, bypassing the need for cash transactions. Authorized participants will be eligible to use this in-kind transaction model, while individual investors will still be required to use the cash-based model. The SEC has opened a public comment period to gather feedback on the proposed rule change. This development follows similar moves by other major ETF providers, such as BlackRock, which have also sought approval for in-kind redemption mechanisms. The adoption of this model could potentially enhance the efficiency of ETF trading. Invesco Galaxy's Bitcoin ETF was approved by the SEC in January last year, followed by the approval of its Ethereum ETF in May. However, both ETFs have recently faced challenges, with significant outflows reported; Bitcoin ETFs saw $371 million withdrawn over seven consecutive days, and Ethereum ETFs experienced $21.57 million in outflows over five days.