Ark Invest, Cathie Wood’s $60B investment firm, and 21Shares, a digital asset management firm, filed an application with the U.S. Securities and Exchange Commission for a spot exchange-traded fund tracking the price of Ether on Sept. 6.
The proposed Ark 21Shares Ethereum ETF is the first application for a spot Ether ETF in the United States. If approved, the trust would directly hold ETH.
“The Trust provides investors with the opportunity to access the market for Ether through a traditional brokerage account without the potential barriers to entry or risks involved with holding or transferring Ether,” the filing said. “[21Shares] believes that the Shares are designed to provide investors with a cost-effective and convenient way to invest in ether without purchasing, holding and trading ether directly.”
Coinbase Custody would hold ETH on behalf of the trust, and the ETF would reference the CME CF Ether-Dollar Reference Rate and adjust for expenses and liabilities. Shares in the ETF would be valued daily at 4pm EST based on the reference index.
The news had little price impact, with ETH trading roughly flat over the past seven days.
The move comes as some analysts predict it may only be a matter of time before a spot crypto ETF receives approval from U.S. regulators.
On Aug. 29, the U.S. District of Columbia Court of Appeals sided with Grayscale against the SEC, ruling that the agency failed to justify its decision to reject the asset manager’s application for a spot Bitcoin ETF last year. The court determined that the SEC’s decision was “arbitrary” considering the similarities between Grayscale’s proposed product and ETFs tracking Bitcoin futures, previously greenlit by the agency.
The SEC also received a flurry of applications for spot Bitcoin ETFs in June after BlackRock, the world’s largest asset manager, submitted its own filing.
The trust’s prospectus emphasizes the risks that could impact ETF investors, including the unregulated nature of offshore digital asset exchanges and “competition from central bank digital currencies.”
The prospectus also notes risks associated with the decentralization of Ethereum’s developers and validators, including network disruptions including hard forks. Threats posed by the advancement of quantum computing also merit a mention.
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