ARK 21Shares expands Ethereum ETF registration capabilities to include cash production and Ether staking
Even though cash redemption might make an ETF more trackable, it usually means more fees for investors.
ARK 21Shares has updated its application for an Ethereum exchange-traded fund (ETF) to include additional features for staking Ether and a shift to a cash-creation mechanism.
The petition also included “other items” that link the Ethereum ETF proposal with the newly authorized spot Bitcoin ETF’s prospectus, according to Bloomberg ETF analyst Eric Balchunas, who published parts of the document on X.
One way that exchange-traded funds (ETFs) get their market price closer to their net asset value is through the creation and redemption procedure that sponsors and authorized participants go through. New spot Bitcoin ETFs adhere to SEC-mandated cash redemption models. Because of this, authorized participants may no longer trade in-kind assets for ETF shares; they must instead swap cash.
Even though cash redemption might make an ETF more trackable, it usually means more fees for investors. However, the concept allows for greater oversight of assets and greatly streamlines the funds’ accounting and auditing processes. The cash model seems to be the preferred choice of the SEC in order to provide a closer relationship between ETF shares and underlying assets, even if it may have some cost implications.
ARK 21Shares has admitted that this methodology might hurt arbitrage deals that try to tie the ETF’s price to Ether. According to ARK 21Shares, the trust will use its cold storage holdings to stake Ether, and the trust will collect staking incentives as revenue.
According to the filing, the sponsor may occasionally stake a portion of the trust’s assets through one or more reputable third-party staking providers.
In spite of the potential for staked Ether profits, the company is aware that there are dangers connected with staking, such as slicing fines, which might lead to the loss of staked Ether. Particularly, the document emphasizes the possibility of locking staked Ether for long durations.