ARK Invest, led by Cathie Wood, and 21Shares have outlined a cash-only creation and redemption process in their recent regulatory filing for a spot Ethereum exchange-traded fund (ETF).
According to the filing posted on Wednesday, authorized participants will solely deliver cash to create shares and will receive cash upon redeeming shares. This approach signifies a departure from the in-kind model, which allows for the exchange of assets instead of cash during creation and redemption.
The decision to adopt a cash-based model aligns with recent discussions between issuers and the Securities and Exchange Commission (SEC) regarding spot bitcoin ETFs. The SEC appears to favor a cash model, wherein issuers sell assets immediately to provide cash to investors, as opposed to an in-kind model, which offers greater portfolio management flexibility.
Bloomberg Intelligence analyst Eric Balchunas highlighted the amendment to the Ark21Shares Ethereum ETF filing, noting its alignment with recently approved spot bitcoin ETF prospectuses.
Additionally, the updated filing introduces a staking component, allowing the trust to stake a portion of its assets through trusted providers. Staking rewards received by the trust would be treated as income, with the amount varying based on staking activity.
The inclusion of staking language in brackets indicates a willingness to discuss potential staking opportunities, signaling an openness to further dialogue on this aspect of the ETF. This approach aims to address potential concerns and facilitate collaboration between stakeholders in the ETF approval process.
