ARK Invest and 21Shares have opted to remove the crypto staking feature from their proposed Ethereum (ETH) exchange-traded fund (ETF), following discussions with the U.S. Securities and Exchange Commission (SEC). This decision marks a shift towards a cash creation and redemption model, departing from the earlier plan involving non-monetary assets like Ether.
Previously, the ETF plan included staking through third-party providers, which has now been omitted from the recent filing submitted on May 10. Initially, 21Shares anticipated earning ETH rewards from staking activities, intending to classify these gains as fund income.
Eric Balchunas, a Bloomberg crypto analyst, commented on social media about the amended filing: “ARK/21Shares has just updated their spot Ether ETF S-1 to focus on cash creations, aligning it with the recently approved spot BTC ETF prospectus.”
The updated filing maintains discussions on potential risks such as slashing penalties, bonding, nonbonding periods affecting fund accessibility, and the potential impact on Ethereum’s market dynamics.
In a parallel development, on February 8, ARK Invest and 21Shares adjusted their application for a spot Ethereum ETF to mirror the cash-creation model used in their approved Bitcoin ETF. The filing on February 7 also hinted at potential staking of ETF-held Ether to leverage additional income streams.
This strategic pivot from the in-kind redemption model, which involved non-monetary assets like BTC, underscores the effort to align with regulatory preferences demonstrated in the approval of Bitcoin ETFs.
Despite the promising outlook for the spot Ether ETF, the SEC has encountered delays in reviewing various proposals, including those from Invesco Galaxy, Grayscale, Franklin Templeton, VanEck, and BlackRock.
The SEC faces imminent decisions on spot Ether ETF applications, with VanEck’s proposal due for a ruling by May 23, followed by ARK Invest and 21Shares’ application on May 24. These rulings carry substantial implications for institutional involvement and broader acceptance of Ether as an investment asset.
Meanwhile, Fidelity and Grayscale have incorporated staking features into their Ethereum ETF applications, aiming to blend income opportunities with regulated financial frameworks and investor access to Ethereum’s staking rewards.
However, U.S. lawmakers remain vigilant about crypto ETFs, citing potential investor risks. The SEC’s challenge lies in balancing the benefits of staking with regulatory considerations and safeguarding investor interests.
For more insights, check out how the BlackRock Bitcoin ETF has seen consecutive days without inflows.