In response to discussions with the U.S. Securities and Exchange Commission (SEC), ARK Invest and 21Shares have opted to remove the staking feature from their proposed Ethereum (ETH) exchange-traded fund (ETF). This decision marks a significant strategic pivot, transitioning from an in-kind redemption model to a cash creation and redemption approach.
The move to eliminate staking from the ETF structure follows deliberations with regulatory authorities, aiming to align the proposal with SEC preferences. Under the revised cash-creation model, ARK Invest and 21Shares will purchase Ether corresponding to the order amount and deposit it with the custodian, facilitating the creation of ETF shares.
Recent filings indicate the removal of sections related to staking, previously included in the ETF proposal. While initial plans hinted at the potential for staking through trusted providers, the updated filing focuses on a cash-creation model and other adjustments to comply with regulatory standards.
Eric Balchunas, a crypto analyst with Bloomberg, remarked on social media, “Here we go again,” noting the alignment of the amended proposal with recently approved Bitcoin ETF prospectuses. The updated filing retains discussions on potential risks, such as slashing penalties and the impact on Ethereum’s price.
Despite the strategic adjustments, regulatory delays continue to impede the launch of spot Ethereum ETFs. Proposals from various industry players, including Invesco Galaxy, Grayscale, Franklin Templeton, VanEck, and BlackRock, have encountered setbacks in SEC decisions.
While institutional interest in Ethereum as an investable asset grows, regulatory scrutiny persists, particularly regarding the integration of staking features. Fidelity and Grayscale have incorporated staking into their Ethereum ETF applications, aiming to capitalize on income opportunities while offering exposure to staking rewards.
However, U.S. lawmakers remain cautious, citing investor risks associated with crypto ETFs. The SEC faces the delicate task of balancing the potential benefits of staking with regulatory considerations and investor protection as it evaluates Ethereum ETF proposals.
As critical decision dates loom for spot Ethereum ETF applications, including those from VanEck and ARK Invest and 21Shares, the outcome will have far-reaching implications for institutional participation and the broader crypto investment landscape.
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