In a landmark development for the cryptocurrency industry, prominent investment management firm Ark Invest and crypto asset manager 21Shares have jointly filed for regulatory approval of an exchange-traded fund (ETF) that would invest directly in Ethereum (ETH).
The proposed "ARK 21Shares Ethereum ETF" would track the price of ETH and trade on the Cboe BZX Exchange, pending approval by the Securities and Exchange Commission (SEC). The SEC is expected to make a decision on the application by mid-October, marking the first potential Ethereum spot ETF approval in the US.
Details of the Proposed Ethereum ETF
According to the prospectus filed with the SEC, the ARK 21Shares Ethereum ETF would operate as follows:
- Trust Sponsor: 21Shares AG
- Trustee: Delaware Trust Company
- Custodian: Coinbase Custody Trust Company, LLC
- Index Provider: CME CF Ether-Dollar Reference Rate administered by CF Benchmarks
Coinbase Custody will hold the Ethereum on behalf of the Trust, while CF Benchmarks' Ether-Dollar Reference Rate will be used to value the ETF's shares.
The filing emphasizes Coinbase's security policies and ability to safeguard the ETF's crypto assets as a key reason for its selection as custodian. This aligns with SEC Chairman Gary Gensler's statements that crypto custody standards are a top consideration for ETF approval.
First Ethereum Spot ETF Would be Landmark for Crypto
The submission of the pioneering Ethereum spot ETF application comes on the heels of a key ruling by the US Court of Appeals regarding a Bitcoin ETF proposal from Grayscale Investments.
The court found that the SEC was "arbitrary and capricious" in denying Grayscale's application, raising hopes that crypto ETFs may finally get regulatory green light after years of rejections.
ARK Invest and 21Shares are among several firms now optimistic about crypto ETF prospects following the Grayscale decision. The SEC must also rule on their joint Bitcoin ETF proposal by November 11th.
Approval of the first spot Bitcoin or Ethereum ETF in the US would enable millions of mainstream investors to conveniently gain exposure to crypto assets within existing brokerage accounts. This is seen as a potential catalyst for significant capital inflows into the crypto space.
ETF Application Comes Amid Frenzy in Crypto Sector
The groundbreaking application from Ark Invest and 21Shares arrives amid an eventful period for both the cryptocurrency and ETF industries:
- The SEC recently delayed decisions on several spot Bitcoin ETF applications but is poised to greenlight the first futures-based Ethereum ETF in October.
- Major traditional ETF issuers like ProShares and Valkyrie have listed Bitcoin futures ETFs following SEC approval.
- Speculation has mounted around an executive order on crypto regulation from the Biden administration.
The Ethereum ETF application comes as the crypto sector faces turmoil from issues like the FTX collapse, which has led to calls for clearer policy from US officials. The SEC is also battling Ripple Labs over whether XRP counts as an unregistered security.
For Ark Invest, 21Shares and other issuers seeking crypto ETFs, regulatory approval cannot come soon enough. With landmark decisions imminent, the industry awaits the SEC's next moves.