Ark 21Shares Updates Ethereum ETF Proposal: Staking, Cash Creation On Table

Zinger Key Points
  • The filing outlines expectations to stake Ethereum tokens from the ETF's cold vault balance for staking rewards.
  • This staking strategy in an ETF is unprecedented and could significantly impact the staking industry and DVT development.

Ark 21Shares has updated its application for a spot Ethereum ETH/USD ETF, introducing new sections on potential staking and adjustments similar to those in its Bitcoin BTC/USD ETF proposal regarding cash creation.

What HappenedScott Johnsson, a general partner at Van Buren, interpreted the bracketed staking language as an indication that Ark 21Shares anticipates discussions with the U.S. Securities and Exchange Commission (SEC) on this matter, Blockworks reported.

The filing outlines the possibility of staking a portion of the ETF's assets through trusted third parties, with the expectation of staking Ethereum from the ETF's cold vault balance in exchange for staking rewards, which could be considered income.

However, the company also acknowledges the risks associated with staking, including the potential loss of Ethereum and liquidity risks due to the inaccessibility of staked tokens during the bonding and unbonding processes.

Also Read: Bitcoin Was 'Terrible Inflation Hedge,' Fed's Neel Kashkari Says: 'Has Anyone Bought Anything With It?'

Why It Matters: This approach to including staking in the ETF's strategy is a first among its peers and could significantly impact the staking industry and the development of distributed validator technology (DVT), according to Blockworks research analyst Spencer Hughes.

Hughes highlighted the importance of this amendment, pointing out that approximately 25% of the total Ethereum supply is currently staked and the involvement of ETFs could dramatically expand the staking sector.

Additionally, Bloomberg Intelligence analyst Eric Balchunas remarked on the amendments ensuring cash creation for the ETF, differentiating it from previous filings by Ark 21Shares and other companies such as BlackRock.

The SEC's decision on the spot Ethereum ETFs is anticipated in May, with Bloomberg Intelligence analyst James Seyffart estimating a 60% chance of approval. 

He however added that his base case was the SEC won’t allow Ethereum staking in the potential spot Ethereum ETFs.

Read Next: MicroStrategy CEO Michael Saylor Doubles Down On Bitcoin, Calls For 'Digital Transformation Of Capital'

Photo: Unsplash

Market News and Data brought to you by Benzinga APIs
Posted In: CryptocurrencyNewsSECMarketsARK 21SharesCrypto Stakingspot Ethereum ETF
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!