‘Here we go again’: ARK, 21Shares remove staking feature from Ethereum ETF plans

As a seasoned crypto investor with a keen interest in Ethereum (ETH) and exchange-traded funds (ETFs), I’m keeping a close eye on the latest developments regarding ARK Invest and 21Shares’ Ethereum ETF proposals. The recent decision to remove the staking feature from their proposal is a significant shift, especially given their previous intention to stake a portion of the fund’s assets through third-party providers.

ARK Invest and 21Shares have made the decision to exclude the crypto staking component in their Ethereum (ETH) exchange-traded fund (ETF) application.

Changes in staking plans, SEC’s response

After productive talks with the U.S. securities regulatory body, the team opted for abandoning the staking feature in the ETF design, moving towards a cash-based creation and redemption process instead.

This change represents a major tactical turn away from the earlier plan that involved the exchange of kind, using non-cash forms of payment like Ether for redemption.

In the updated cash-purchase scheme, ARK Invest and 21Shares will acquire the specified amount of Ether and then transfer it to the safekeeping institution, enabling the generation of ETF units.

A recent filing dated May 10th no longer includes the section specifying that 21Shares would delegate staking of some fund assets via external providers. Previously, this option of using reputable third parties for staking was suggested.

In their February 7th submission, the companies disclosed that 21Shares anticipated receiving Ethereum (ETH) rewards from staking and planned to categorize these gains as income derived from the fund.

“Eric Balchunas, a cryptocurrency analyst at Bloomberg, expressed frustration once more on social media. ARK/21Shares has revised their S-1 filing for a spot Ethereum ETF. The changes seem to include cash creation methods and other adjustments that align the proposal with the recently accepted spot Bitcoin ETF prospectus.”

See below.

Once more, 21Shares’ ARK ETF filing for a spot Ethereum ETF has been revised. The changes include adopting only cash creation methods, as well as other adjustments aligning with the recently accepted proposal for a spot Bitcoin ETF.

— Eric Balchunas (@EricBalchunas) February 7, 2024

As a researcher studying the latest developments in the Ethereum market, I can share that the revised filing encompasses a more comprehensive exploration of potential risks. These include possible financial setbacks from hefty penalties, the short-term unavailability of funds during bonding and non-bonding periods, and the potential influence on Ethereum’s value.

Spot Ethereum ETF launch faces regulatory delays

On February 8th, I noticed that ARK Invest and 21Shares made revisions to their Ethereum exchange-traded fund (ETF) application. They transitioned towards a cash-creation model, similar to the one used in their approved Bitcoin ETF.

An amendment submitted on February 7th proposes a strategy for partially deploying the ETF’s Ethereum (ETH) reserves for staking, with the objective of earning extra revenue via staking rewards.

As a researcher studying ARK 21Shares, I would describe the shift from an in-kind redemption system, where non-cash assets like Bitcoin were accepted, to a cash-creation model as a major strategic turn. This change signifies a new approach in how ARK 21Shares handles redemptions and is intended to streamline operations and provide more flexibility for investors.

In the new arrangement, companies will purchase the necessary Ether based on their orders and then transfer it to a trusted custodian, resulting in the generation of ETF units.

As a researcher studying the world of cryptocurrency exchange-traded funds (ETFs), I would express this idea as follows: By making this move, the Ether ETF now conforms more closely to the regulatory guidelines that were instrumental in the approval process for Bitcoin ETFs.

The SEC has faced difficulties in reaching verdicts on several proposed Ether ETFs, despite the potential of these funds being quite promising.

Proposals from Invesco, Grayscale, Franklin Templeton, VanEck, and BlackRock to launch Ethereum ETFs through the Invesco Galaxy trust, among others, have encountered setbacks in the approval process.

The Securities and Exchange Commission (SEC) is now responsible for making important judgements regarding Ether Exchange-Traded Fund (ETF) proposals submitted by firms such as VanEck, ARK Invest, and 21Shares. The deadline for the SEC’s decision on VanEck’s application is May 23, with decisions on ARK Invest’s and 21Shares’ applications scheduled for May 24.

The consequences of these choices are substantial in the realm of cryptocurrency investments. They have the potential to boost institutional involvement and broaden recognition of Ether as a viable investment option.

As an analyst, I would rephrase it as follows: I’m excited to announce that Fidelity and Grayscale have incorporated staking functionality into their Ethereum Exchange-Traded Fund (ETF) offerings. By doing so, these financial institutions are enabling investors to capitalize on income-generating opportunities within the regulated finance sector while providing exposure to Ethereum’s lucrative staking rewards.

As a researcher studying the intersection of cryptocurrencies and securities regulations in the United States, I’ve noticed that lawmakers have raised concerns over crypto Exchange-Traded Funds (ETFs). Their primary argument is the potential risks to investors. In this context, my focus lies on the Securities and Exchange Commission (SEC), which plays a crucial role in evaluating these ETF applications. The SEC must strike a delicate balance between the advantages of staking crypto assets and addressing regulatory risks while ensuring adequate investor protection.

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2024-05-11 20:24