Cboe seeks U.S. SEC approval for in-kind redemptions of Invesco Galaxy Bitcoin and Ethereum ETFs

The Cboe BZX Exchange proposed a rule change with the U.S. SEC on behalf of Invesco Galaxy, seeking approval for the in-kind creation and redemption of Invesco Galaxy’s Bitcoin and Ethereum ETF shares. The public has been invited to give feedback on the matter as the U.S. SEC reviews Cboe’s proposed rule change.

However, the proposal filed on March 13 clarified that only institutional investors will be eligible for the in-kind transactions model; individual investors will still be required to use the cash-based model when buying or redeeming ETF shares. In-kind creation and redemption of Invesco Galaxy’s BTC and ETH ETF shares will allow institutional clients to directly exchange digital assets for ETF shares without needing cash.

Invesco Galaxy’s proposed in-kind transactions model is expected to remove the need for institutions to sell crypto holdings to create shares, thus reducing the time needed to complete transactions and avoiding additional payments/commissions to brokers. If approved, the proposal will allow investors to tap into Bitcoin (BTC) and Ethereum (ETH) without holding the assets physically.

Cboe files to allow Invesco Galaxy’s in-kind transaction model 

CBOE BZX's proposal for Invesco Galaxy's physical creation model could shake up the crypto landscape. Expect widened institutional access, slashed trading costs, and ramped-up liquidity for $BTC and $ETH ETFs. 🚀

– Direct swaps = more demand, possible price surge 📈
– SEC's…

— Alva (@AlvaApp) March 13, 2025

Cboe proposed amending several parts of its previous rule filing to list and trade BTC ETP Amendment No. 2 and ETH ETP Amendment No. 1 to permit in-kind creations and redemptions. The proposal published this morning included Cboe’s statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change.

The Exchange also denied that the proposed rule change would impose any burden on competition that is not necessary or appropriate in ‘furtherance of the purposes of the Act’. Cboe highlighted that the proposed amendments were intended to allow Invesco Galaxy’s ETFs to operate more efficiently.

Serial entrepreneur Austin Zaback claimed that Bitcoin excitement was ramping up as Cboe’s move to allow in-kind redemptions for Invesco Galaxy’s ETFs projected bullish times ahead, even with $7B BTC liquidations at $92,500 hinting at a massive short squeeze. On March 12th, Farside’s data revealed that Bitcoin ETFs saw over $371 million in outflows, marking the seventh straight day of consecutive outflows. Ethereum also extended its negative flows streak to five days with over $21 million in outflows. 

Cboe’s filing follows similar moves by BlackRock, which also recently sought approval for the in-kind redemption model. 

Cboe believes the proposal is consistent with the Securities Exchange Act of 1934

Cboe claimed that the proposed rule change was consistent with the requirements of Section 6(b) and Section 6(b)(5) of the Act. Specifically, Cboe pointed out that the proposed rule change was consistent with the Section 6(b)(5) requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices and to promote just and equitable principles of trade. 

The rules should also be designed to promote cooperation and coordination with persons engaged in regulating, clearing, settling, processing information, and facilitating transactions in securities to remove barriers and perfect the mechanism of a free and open market and a national market system, and generally, to protect investors and public interest.

The exchange also noted that all other representations in the BTC ETP Amendment No. 2 and ETH ETP Amendment No. 1 remain unchanged except for the proposed rule changes. 

The public has been invited to provide feedback concerning the proposed rule change to the U.S. SEC through electronic comments (email or comment form on the U.S. SEC website) or paper comments, which must be sent in triplicate to the U.S. SEC Secretary. All submissions should refer to file number SR-CboeBZX-2025-035.

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