ARK 21Shares Amends Ethereum ETF Application, Proposes Cash Creation and Staking

According to Cointelegraph: ARK 21Shares has revised its spot Ethereum (ETH) exchange-traded fund (ETF) proposal to replicate the cash-creation model of its recently approved spot Bitcoin ETF. The change was detailed in an S-1 amendment filed on February 7, which also suggests a plan to stake part of the ETF’s ETH for additional income. Implementing the cash-creation model would mean ARK 21Shares purchases ETH equivalent to the order amount and deposits the ETH in the trust's account with a custodian. Consequently, shares of the spot Ether ETF are created. However, the Cathie Wood-led firm recognized potential adverse effects on arbitrage transactions conducted by Authorized Participants to align the share price with ETH's. Moreover, the filing proposes adding a staking feature to its spot ETH ETF. ARK 21Shares plans to stake ETH from the trust’s cold vault balance, with staking rewards treated as income. However, they acknowledge staking comes with risks, such as losing ETH via slashing and lock-up periods. Bloomberg ETF analysts suggest that their base case is that the SEC might not allow staking as a component of the spot Ether ETFs. The SEC is expected to decide on the submitted applications, including ARK 21Shares' by May 24, with other important dates following for Grayscale, Invesco, Fidelity and BlackRock.