ARK 21Shares Ethereum ETF created with cash, adds seriousness
ARK 21Shares has updated its cash generation model – similar to the spot Bitcoin (BTC) ETF – to its Ethereum exchange-traded fund application and plans to take a portion of the ETF's Ether (ETH) to generate more. Income.
In December, ARK 21Shares and BlackRock were among the first issuers to convert their positions in Bitcoin ETFs to a monetization and redemption model following back-and-forth meetings with the U.S. securities regulator.
ARK 21Shares first offered an in-kind redemption model for the Ether ETF, which refers to non-cash payments such as BTC.
In the cash model, ARK 21 Shares buys Ether equal to the amount of the order and deposits the Ether obtained in the trust account with the custodian. Spot Ether ETF shares are created.
Bloomberg ETF analyst Eric Balchunas said the changes detailed in the latest S-1 filing filed on Feb. 7 “bring it in” with bitcoin ETFs in the now-allowed space.
Here we go again: ARK/21Shares just filed an updated S-1 for their spot ether etf, which appears to be the only updated financial innovation and others they brought with their recently approved spot btc etf prospectus. pic.twitter.com/clN2oZmA6I
— Eric Balchunas (@EricBalchunas) February 7, 2024
The Kathy Wood-led firm admitted that the cash creation model could affect arbitrage transactions by authorized participants to keep the share price close to Ether.
Ether staking plans floated
The ETF issuer's latest S-1 filing also proposes adding a significant component to the spot Ether ETF.
“The sponsor may, from time to time, acquire a portion of the trust's assets through one or more trusted third-party stakeholders.”
ARK 21Shares says it keeps Ether in balance from its trusted cold vault and the trust is treated as income and earns huge rewards.
All the TradFi folks are going to be totally salivating over the exact product that a one-stop ETH ETF can offer.
You do not own enough ETH.
— sassaal.eth/acc (@sassal0x) November 10, 2023
ARK 21 Shares Accredited share movement comes with risks, such as losing ETH through severance, and the ETH that owns that share is, in some cases, locked up for longer periods of time.
Financial lawyer Scott Johnson explained that clauses related to stacking are placed in parentheses, which usually means that the applicant wants to add and is open to discussions with the regulator.
Interestingly, adding a stock part (in parentheses): pic.twitter.com/dOilIKEyrs
— Scott Johnson (@SGJohnsson) February 7, 2024
Bloomberg ETF analyst James Seifert said his “fundamental issue” is that the SEC won't allow savings as part of the spot ether ETF. “But time will tell,” he added.
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Seifert's fellow Bloomberg ETF analyst Erik Balchunas recently cut his approval rating for the spot ether ETF through 2024 from 70% to 60% on Jan. 30.
The SEC is expected to rule on VanEck's application on May 23, ARK 21Shares on May 24, Hashdex on May 30, Grayscale on June 18 and Invesco on July 5.
Fidelity and BlackRock applications are due August 3 and August 7.
However, Seifert expects a decision on all applicants to be made by May 23 – just as the US securities regulator made a decision on the ubiquitous Bitcoin ETFs on January 10.
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