ARK Invest & 21 Shares Submit Application for First Ethereum ETF

Jimmy Aki
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ARK Invest and 21Shares have jointly submitted a regulatory application seeking approval to introduce an exchange-traded fund (ETF) specifically designed to secure ether (ETH).

First of Its Kind

On September 5, Cathie Wood’s ARK Invest and the cryptocurrency investment firm 21Shares submitted a request for regulatory approval to establish an ETF focused on directly holding ether.

This development was disclosed in an official filing with the U.S. Securities and Exchange Commission (SEC).

Dubbed the ‘ARK 21Shares Ethereum ETF’, it represents the first-ever attempt to introduce such a fund in the United States, directly allocating investments into ETH, the second-largest cryptocurrency by market capitalization.

Per the filing, the ARK 21Shares, known as the ‘Trust, is an exchange-traded fund that issues common beneficial interest shares (Shares) traded on the Cboe BZX Exchange.

Exchange-traded funds are SEC-registered investment companies that offer investors a way to pool their money in a fund that invests in stocks, bonds, or other assets.

The Ethereum ETF’s primary investment objective is to replicate the performance of ether, as indicated by the Index, after accounting for the Trust’s expenses and other obligations.

To accomplish this objective, ARK 21Shares will retain ether and calculate the value of its Shares daily at 4:00 p.m. ET based on the Index.

Under normal circumstances, it will not buy or sell ether except for potential sales by the sponsor to cover certain expenses. This process may be facilitated by the custodian, Coinbase (COIN) Custody Trust Company.

Instead, when ARK 21Shares sells or redeems its Shares, it will engage in an “in-kind” transaction – a process of moving assets from one brokerage account to another without selling or buying.

In addition, participants, financial firms with permission to acquire Shares from the Trust or redeem them, will deliver or help deliver ether to the Trust’s account held by the custodian in exchange for Shares.

Conversely, when these Authorized Participants redeem Shares, the Trust, via the custodian, will provide ether.

Meanwhile, the Bank of New York Mellon will assume the Trust’s transfer agent role. This entity is responsible for facilitating the issuance and redemption of Trust Shares.

The firm will also address inquiries from Trust Shareholders and other parties concerning its responsibilities, managing shareholder accounts, and providing periodic reports to the Trust.

A Positive Future for ETF Approvals

ARK Invest and 21Shares’ recent proposal for a cryptocurrency ETF is just one of several such ETFs currently under review by the SEC.

In addition, numerous companies now appear optimistic about obtaining regulatory clearance. This is due to the successful appeal by asset manager Grayscale, which necessitates the SEC to review its decision regarding the conversion of its Bitcoin Trust into a Bitcoin ETF,

On August 29, a Federal court ruled against the SEC’s decision to reject Grayscale Investments’ application to list an ETF tracking Bitcoin’s price.

The court found the SEC’s persistent concerns about market manipulation insufficiently substantiated, particularly given their prior approval of futures-based Bitcoin ETFs.

This case has drawn close attention from the cryptocurrency and asset management sectors. For years, they have been striving to persuade the SEC to greenlight a spot-Bitcoin ETF.

However, On August 31, two days following the verdict on Grayscale’s ETF, the SEC disclosed its postponement of a decision regarding the approval or rejection of spot Bitcoin ETF applications submitted by seven companies, including the world’s largest firm, BlackRock.

Bloomberg’s senior ETF analyst, Eric Baclhunas, noted that in the past, the SEC had advised hopeful applicants to withdraw their future-based Ethereum ETF requests about a week after submission.

However, this time, these applications remain under the scrutiny of the SEC. The regulatory body is expected to decide on or before mid-October.

On Wednesday, Eric Baclhunas hinted in a Tweet that other companies are likely to swiftly follow in the footsteps of ARK Invest.

He suggested that more applications could be imminent or already in the pipeline.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.