- ARK 21Shares’ proposed Ether ETF has just changed its tune, adopting a cash-creation model.
- The filing has also hinted at potentially staking some of the ETF’s Ether holdings for extra income.
- The cash model aims to match Bitcoin ETF standards, but arbitrage concerns have lingered.
Hopes for a US-listed spot Ether exchange-traded fund (ETF) just got a bit more complex. ARK 21Shares, in a move mirroring their approved Bitcoin ETF, has amended its application to adopt a cash-creation model and even explore the potential of staking a portion of the fund’s Ethereum holdings.
ARK 21Shares Switches Ether ETF to Cash Creation Model
This follows the December 2023 trend where several issuers, including ARK 21Shares and BlackRock, shifted their proposed Bitcoin ETFs to a cash creation and redemption model after discussions with the US Securities and Exchange Commission (SEC).
Initially, ARK 21Shares had proposed an in-kind redemption model for their Ether ETF, allowing for non-monetary settlements with assets like Bitcoin. So, how does the cash-creation model work?
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Under this approach, ARK 21Shares would purchase Ether equivalent to the order amount and deposit it with the fund’s custodian. This would then trigger the creation of new ETF shares. Bloomberg ETF analyst Eric Balchunas sees this as a move to align the Ether ETF application with the recently approved Bitcoin ETFs.
However, ARK 21Shares acknowledges that this model could hinder arbitrage activities to maintain a close price link between the ETF shares and Ether itself.
Ether ETF Eyes Staking for Extra Yield
But the plot thickens. The amended filing also introduces the possibility of staking a portion of the Ether held by the ETF. This staking through trusted third-party providers would allow the fund to generate additional income from staking rewards.
Interestingly, the sections related to staking are bracketed in the filing, suggesting that ARK 21Shares is open to discussing this aspect further with the SEC. Bloomberg ETF analyst James Seyffart believes the SEC might not approve staking as part of the Ether ETF but acknowledges the possibility of change.
On the Flipside
- As acknowledged by ARK 21Shares, the cash model could hinder arbitrage, impacting the ETF’s ability to track Ethereum’s price closely.
- The SEC’s stance on staking within ETFs remains unclear, and approval is uncertain.
Why This Matters
ARK 21Shares’ shift to a cash-creation model for their proposed Ether ETF mirrors their Bitcoin ETF, potentially speeding up approval but hindering price tracking. Additionally, the proposed staking feature adds complexity and potential regulatory hurdles, raising questions about its ultimate inclusion.
Curious about the future of Ethereum and how it plans to scale? The Dencun upgrade is a major step towards a more scalable Ethereum network. Read more here:
Ethereum Dencun Headed to Mainnet After Acing Final Test
Want to know more about South Korea’s proposal for Bitcoin ETFs? This article discusses their plans for a meeting with the SEC Chair:
South Korea Plans Bitcoin ETF Talks with SEC Chair Gensler
