In response to discussions with U.S. securities regulators, ARK Invest and 21Shares have opted to remove the staking feature from their proposed Ethereum (ETH) exchange-traded fund (ETF).
Evolution in Staking Plans and SEC’s Response
The decision to eliminate staking from the ETF structure comes after fruitful talks with regulators, resulting in a transition to a cash-based creation and redemption model.
This strategic shift marks a notable departure from the previously considered model involving non-monetary payments such as Ether.
Under the updated cash-creation model, ARK Invest and 21Shares will purchase Ether equivalent to the order amount and deposit it with the custodian, facilitating ETF share creation.
In a recent filing on May 10, the section outlining 21Shares’ intention to stake a portion of the fund’s assets through third-party providers was omitted. Previously, there had been discussions about the possibility of staking through trusted providers.
Crypto analyst Eric Balchunas remarked on social media, “Here we go again.” He noted the updated filing aligns with the recently approved spot BTC ETF prospectus, shifting towards cash creations.
Spot Ethereum ETF Launch Encounters Regulatory Hurdles
On Feb. 8, ARK Invest and 21Shares amended their application for a spot Ethereum ETF, transitioning to a cash-creation model similar to their approved spot Bitcoin ETF.
The amendment, filed on Feb. 7, also included plans to potentially stake a portion of the ETF’s Ether holdings, aiming to generate additional income through staking rewards.
Moving from an in-kind redemption model to a cash-creation model represents a strategic pivot for ARK and 21Shares.
The transition aligns the Ethereum ETF closely with regulatory preferences seen in the approval of Bitcoin ETFs.
Despite optimism surrounding the Ethereum ETF, the Securities and Exchange Commission (SEC) has faced delays in deciding on various proposals, including those from Invesco Galaxy, Grayscale, Franklin Templeton, VanEck, and BlackRock.
The SEC is now tasked with crucial decisions on spot Ethereum ETF applications, with deadlines approaching for VanEck and ARK Invest and 21Shares.
These decisions hold significant implications for crypto investments, potentially boosting institutional participation and Ether’s mainstream acceptance as an investment asset.
Fidelity and Grayscale have integrated staking features into their Ethereum ETF proposals, aiming to tap into income opportunities within regulated finance while offering exposure to Ethereum’s staking rewards. However, U.S. lawmakers are scrutinizing crypto ETFs due to investor risks. The SEC faces the challenge of balancing staking benefits with regulatory concerns and investor protection.
Summary Review: The decision by ARK Invest and 21Shares to remove the staking feature from their proposed Ethereum exchange-traded fund (ETF) represents a strategic adjustment in response to discussions with U.S. securities regulators. This move aligns their ETF plans more closely with regulatory preferences and sets the stage for potential approval. However, despite the promising prospects for Ethereum ETFs, regulatory delays and challenges remain, with the Securities and Exchange Commission (SEC) facing critical decisions on various proposals. These decisions carry significant implications for the crypto investment landscape, potentially increasing institutional participation and mainstream acceptance of Ethereum as an investable asset. As the SEC navigates the balance between staking benefits and regulatory concerns, the outcome of these decisions will shape the future of crypto ETFs and their impact on the broader investment market.
Disclaimer: Remember that nothing in this article and everything under the responsibility of Web30 News should be interpreted as financial advice. The information provided is for entertainment and educational purposes only. Investing in cryptocurrency involves inherent risks and potential investors should be aware that capital is at risk and returns are never guaranteed. It is imperative that you conduct thorough research and consult with a qualified financial advisor before making any investment decision.
