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Arca Labs received approval from the Securities and Exchange Commission for its U.S. Treasury Fund, an Exchange Traded Fund initiative that will run with Ethereum-backed ArCoin.
There is a general belief that blockchain and cryptocurrency-related projects get very strict regulation from the government and the Securities and Exchange Commission (SEC) that is particularly skeptical of blockchain companies intending to list. The SEC phobia for blockchain companies seems to have ended as Arca Labs gets its approval and has begun selling shares in the “Arca U.S. Treasury Fund.”
The Arca U.S. Treasury Fund is an SEC-registered closed-end fund whose digital shares – ArCoins – trade atop the Ethereum blockchain. The fight to get approval took about 2 years as revealed in the Securities and Exchange Commission’s Regulatory Filings as Arca Labs received its “Notice of Effectiveness” on Monday, June 6th. This fund represents the first of its kind and hopes to attract more investors in the course of the year.
Rayne Steinberg, chief executive officer of Arca, said:
“Our announcement today is a ground-breaking and transformative step toward the unification of traditional finance with digital asset investing as this new category of regulated, digital investment products is made available to investors. It is truly exciting to be pioneering new digital investment products through our Arca Labs division that marry best practices used in traditional finance with the many potential benefits of digital and blockchain technology—this is the next stage of development for the digital ecosystem”.
Evolution of Blockchain ETFs and Arca U.S Treasury Fund
Arca Funds is a Los Angeles-based money manager specializing in cryptocurrencies. The company’s business model takes the form of blockchain Exchange Traded Funds ETFs which work by exclusively investing in a basket of blockchain-based companies that have business operations in blockchain technology or those which invest or profit from it.
Before now, there has been a strong rebuff on Bitcoin-based Exchange Traded Funds as a result of complicated regulation possibilities. This can be attributed to the privacy concerns which partially shield the identity of investors as well as the high volatility the company comes with. Exchange Traded Funds modeled on the backdrop of blockchain technology excluding cryptocurrencies are however gaining traction in recent times as many companies began integrating blockchain technology to revamp their operations and services. Auditing Firms Deloitte has a series showing the growing adoption of blockchain technology across industries that have attracted investors.
The Arca U.S Treasury Fund is described by the company as a Blockchain Traded Fund (BTF) giving it its first pass with the SEC. The fund will be based on a proposed “ArCoin” and will be used in investing in government-owned Treasury Bonds. Coindesk’s Bradley Keoun wrote:
“The U.S. government’s triple-A ratings from Moody’s and Fitch make the securities heavily sought after by foreign central banks as reserves, and by investors as a safe haven from volatile stock and corporate-bond markets in times of geopolitical or economic turmoil. But it’s the blockchain-based issuance and distribution technology that’s new and, as yet, untested for a regulated investment fund”.
Arca’s proposed investment in the U.S. government’s treasury bonds undoubtedly gave the SEC good confidence in approving Arca’s application for listing.
How Arca’s Treasury Fund Will Drive a New Rush
The milestone made by Arca Labs to get SEC approval can spike a new rush by similar companies to pitch related businesses. The emergence of Arca Labs’ U.S-based Treasury Funds has helped investors know that a viable business irrespective of the company’s footing can attract interest from the Fed.
To date, the SEC has not approved any Bitcoin-related exchange-traded fund, a development that has a spiked disinterest in pitching more related projects. In October 2019, the Securities and Exchange Commission rejected Bitwise’s Bitcoin Exchange Traded Fund stating that the proposed project did not meet standards to prevent fraud and market manipulation. While this remains the bone of contention surrounding Bitcoin ETFs, Arca Lab’s proposal seems to have what it takes to prevent extreme price volatility in its proposed ArCoin.
The coming days may force earlier rejected projects to revise their models to such that may interest the SEC just as ArCoin did that.