2024-05-11
ARK Invest and 21Shares have recently made a noteworthy revision to their application for a spot Ethereum ETF. This revision involves the removal of a crucial staking component.
In the previous filing, it was mentioned that the ETF sponsor may pool some of the trust's ether assets through reputable third-party providers, thereby earning staking rewards that would be considered income. However, this also exposed the fund to potential risks such as slashing penalties.
However, the latest filing from ARK Invest and 21Shares no longer includes this staking component.
Eric Balchunas, an analyst at Bloomberg ETF, commented on this update and speculated on the reasons behind the change. He suggested that it could be an effort to simplify the application process by aligning with future SEC guidelines or to eliminate a potential objection that might result in rejection.
The ARK Invest and 21Shares Ethereum ETF was originally filed in September 2023 with the aim of providing investors with direct access to ether through trading on the Cboe BZX Exchange.
The fund is designed to track the precise price of ether using the CME CF Ether-Dollar Reference Rate—New York Variant.
The ETF's structure consists of 21Shares as the trust sponsor, Delaware Trust Company as the trustee, and Coinbase Custody Trust Company as the ether custodian. It is expected to offer investors a convenient way to gain exposure to Ethereum through standard brokerage accounts. ARK Investment Management oversees the fund and provides marketing assistance as well.
Optimism regarding the approval of a spot Ethereum ETF by the SEC has waned in recent months. Balchunas revised his prediction for the likelihood of approval to 25% by the end of May, down from the original estimate of 70%.
Regulatory delays and changing sentiment have also impacted the broader cryptocurrency ETF market, with the SEC postponing decisions on several proposed funds.
Numerous applications for spot Ethereum ETFs are still pending, awaiting confirmation of SEC approval. On a separate note, Grayscale Investments withdrew its Ethereum Futures ETF application and shifted its focus to converting its Ethereum Trust (ETHE) into a spot Ethereum ETF.
The removal of the staking component reflects the evolving regulatory landscape and the emergence of compliant structures that adhere to SEC standards.
If approved, an Ethereum ETF could present a significant opportunity for institutional and retail investors seeking exposure to digital assets through traditional, regulated vehicles.
However, the ETF market continues to await regulatory decisions, with the decision on Invesco Galaxy's spot Ethereum ETF now postponed to July 2024.
ARK 21Shares expects a response to its amended application by May 23, 2024, but it remains uncertain when or if the SEC will grant approval.
