ARK Invest and 21Shares Revise Ether ETF Proposal; Know Why

In an environment where regulatory approval is more important than innovation, the ARK Invest and 21Shares revision of their Ether ETF proposal, which eliminates the staking option, is a strategic move to navigate the intricate waters of SEC rules.

ARK Invest and 21Shares original proposal for the ETF included the option to stake a percentage of the ETF’s assets, which would have allowed the ETF to earn extra Ether as a bonus. This ownership option was expected to boost the ETF's value for investors. However, in the middle of the SEC's delays and a negative appraisal of the fund's chances of approval, the two corporations decided to drop this alternative.

The decision to update the Ether ETF proposal and abandon the staking plans has consequences. Staking has been a key component of the Ethereum network ever since it moved to a proof-of-stake (PoS) system. By participating in staking, users can earn Ether, which improves the network's security and efficiency. The original proposal aimed to use this mechanism to generate revenue for the fund, with the earnings classified as revenue generated by the ETF.

However, this element needs to be included in the updated proposal. This could be due to feedback or concerns from the SEC. It could also be an effort to simplify approval by simplifying the ETF structure and removing elements that could raise regulatory issues.

The revision comes after the Securities and Exchange Commission (SEC) prolonged and delayed the clearance of many cryptocurrency-linked exchange-traded funds (ETFs), including Ethereum-linked ETFs. Historically, the SEC has been skeptical, if not unwilling, to approve crypto goods, which are unpredictable and risky.

The decision made by ARK Invest and 21Shares to amend their plan might be another indicator of the more significant industry's willingness to satisfy regulatory criteria. By eliminating the staking option, these corporations may be demonstrating their readiness to follow SEC recommendations and speed approvals.

If approved, the Ether ETF will trade on the BZX Exchange (Cboe) and offer direct exposure to the cryptocurrency. The ETF’s performance will be tied to CME CF’s (the exchange traded under the New York variant of the CME) ether-dollar Reference Rate, providing investors with a regulated way to get exposure to the world’s second-largest cryptocurrency by market cap.

The deadline for the SEC to vote on the proposal is fast approaching, and the crypto world is waiting with anticipation. Will this strategic update clear the way for the proposal to be approved, or will it prove to be another instance of regulatory prudence?  It’s too early to say for sure, but one thing’s for sure: The outcome will have a significant impact on the future of crypto investment products.