The latest Ethereum exchange-traded fund (ETF) filing from ARK Invest, led by Cathie Wood, and 21Shares places a spotlight on the cash creation and redemption processes, deviating from the earlier focus on spot bitcoin ETFs in discussions with the Securities and Exchange Commission (SEC).
As detailed in their recent regulatory filing, the proposed spot Ethereum ETF by ARK Invest and 21Shares will exclusively involve a cash delivery system for creating and redeeming shares.
According to the filing posted on Wednesday, “Authorized Participants will deliver only cash to create shares and will receive only cash when redeeming Shares.”
Previously, discussions between the SEC and ETF issuers regarding spot bitcoin ETFs had underscored the significance of the creation and redemption processes. The SEC appears to favor a cash model, where issuers need to promptly sell assets and convert them into cash for investors during redemption. This differs from an in-kind model, favored by some asset firms like BlackRock, allowing greater flexibility in managing the portfolio.
Bloomberg Intelligence analyst Eric Balchunas highlighted the adjustments in the Ark21Shares Ethereum ETF filing, noting its alignment with the recently approved spot bitcoin ETF prospectus.
The updated filing also introduced a new staking component, indicating that the sponsor may stake a portion of the Trust’s assets through trusted Staking Providers, expecting to stake ether tokens from the Trust’s Cold Vault Balance. Staking rewards in ether tokens may be treated as income to the Trust, with the amount varying significantly.
The inclusion of language about staking in brackets signals an opportunity for discussion, according to Van Buren Capital’s Scott Johnsson. The brackets imply, “we’re putting this here, but let’s have a conversation because this might come across as inflammatory and it’s not critical to the application.”
The original proposal for the spot ether ETF was submitted by Ark Invest and 21Shares in September, aiming to offer direct exposure to ether. The ETF is planned to trade on the Cboe BZX Exchange, utilizing the CME CF Ether-Dollar Reference Rate – New York Variant.
The SEC, which previously delayed the decision timeline for this ETF in December and sought public comments, has also extended deadlines for other spot Ethereum ETF proposals, including those from Grayscale Investments and the Invesco Galaxy Ethereum ETF.
