ARK 21Shares Revises Application for Spot Ether ETF, Adds Staking Component

Key Takeaways

• The SEC will decide on the spot ether ETFs in May.

• In the cash creates model, ARK 21Shares would buy Ether equal to the order amount and deposit it into the trust’s custodian account.

ARK 21Shares, in collaboration with Cathie Wood’s ARK Invest, has made significant revisions to its application for a spot Ethereum exchange-traded fund (ETF). The updated proposal introduces a cash-creation model, akin to its approved Bitcoin ETF, and includes plans for staking Ethereum to generate additional income.

According to the new filing, the ETF will only use cash for creating and redeeming shares, aligning with SEC preferences for cash transactions over in-kind redemptions. This adjustment follows discussions with the SEC and mirrors recent changes made by other ETF issuers. Additionally, the amended filing introduces a staking component, enabling the sponsor to stake some of the trust’s assets through trusted third-party providers. Staking rewards would contribute to the trust’s income, potentially enhancing investor returns.

Ark 21Shares amended the S-1 for their spot ether ETF, incorporating changes such as adding a section on potential staking and introducing language similar to its bitcoin ETF regarding cash creation. The addition of staking language, enclosed in brackets, indicates the issuer’s intention to include the section, subject to discussions with the Securities and Exchange Commission.

The new filing marks a potential milestone for the convergence of traditional finance and digital assets. Currently, approximately 25% of the total ETH supply is staked, suggesting significant potential for growth in the staking industry, particularly with the inclusion of ETH holdings from ETFs.

The SEC is set to decide on the spot ether ETFs by May, with applications from various issuers pending review. The cash creation model adopted by ARK 21Shares aligns its spot Ether ETF with approved spot Bitcoin ETFs, ensuring consistency in operations.

However, the adoption of the cash creation model may impact arbitrage transactions by authorized participants, potentially affecting the share price’s correlation with Ether. Nonetheless, ARK 21Shares remains optimistic about the proposed ETF’s prospects, particularly with the addition of the staking element, which could provide an additional avenue for income generation.