ARK 21Shares Adjusts Ethereum ETF Proposal with Cash Creation Model and Staking Plan
ARK 21Shares has made changes to its application for an Ethereum exchange-traded fund (ETF) by adopting a cash-creation model, similar to its Bitcoin ETF. The strategic amendment also includes the potential for staking a portion of the ETF’s Ether holdings to generate additional income through staking rewards.
This shift follows ARK 21Shares’ successful transition of its Bitcoin ETFs to a cash creation and redemption model in December after discussions with US securities regulators. Under the new model, ARK 21Shares will purchase Ether corresponding to the order amount and deposit it with the custodian, creating ETF shares.
The move is intended to align the Ether ETF more closely with regulatory preferences seen in the approval of Bitcoin ETFs. However, this change may impact arbitrage transactions conducted by Authorized Participants and poses challenges for ETF issuers in balancing regulatory compliance and market functionality.
Staking Proposal Raises Debate and Skepticism
The amended S-1 filing also introduces the concept of staking a portion of the ETF’s Ether holdings through trusted third-party providers. While this aims to leverage staking income, it comes with risks such as potential losses and extended lock-up periods.
Industry observers have debated this proposal, with some suggesting it is tentative and subject to regulatory dialogue. Skepticism remains regarding the Securities and Exchange Commission’s willingness to allow staking within spot Ether ETFs.
SEC Decision Anticipated by May
The SEC’s decision on various spot Ether ETF applications, including ARK 21Shares’, is eagerly awaited. Deadlines for these decisions stretch from May to August 2024, but some analysts anticipate a collective decision as early as May 23.
Market Dynamics Respond to ETF Proposal Update
The announcement of ARK 21Shares’ updated ETF filing has not only sparked discussions around regulatory compliance and innovation but also influenced market dynamics. Following the news, Ether’s price experienced a significant surge, reaching a two-week high above $2,400.
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