Arca Applies for SEC Approval on Bond-Backed ERC-20 Stablecoin on Ethereum Blockchain
The US Securities and Exchange Commission (SEC) has been working to regulate the cryptocurrency industry locally lately, though there is still a lot of confusion. The SEC has gone after multiple exchanges for their failure to register as securities, saying that it is better for platforms to come forward and speak with the authority directly, rather than wait to violate the regulations.
The SEC recently received an application from Arca to receive regulatory approval for their efforts to release a stablecoin to appeal to retail investors.
The prospectus was filed with the SEC on Friday in an effort to get a bond fund, which the digital asset manager would use to tokenize stocks on the Ethereum blockchain. Arca remains hopeful that the approval will come through for the SEC later in 2019. If approved, the new Arca US Treasury Fund would be available to the public. However, the filing specifically states that it wouldn’t be traded on any type of exchange.
ERC20 tokens would represent the shares of the fund, which would be called Arca UST Coins. Much of the publicity around the coin appears to market the asset as a stablecoin, or at least a cryptocurrency that plans to have a parity with a traditional asset. Still, the company has warned that the stability will not be as strong as other products that are already in the market.
The target of Arca is that the net asset value of the crypto assets will be $1 per share, with a $1,000 minimum investment in the fund. Of the entire fun, the majority (80%) would end up invested in securities rooted in the US Treasury. The remainder would be distributed into debt issued by both public and private entities. These debts would come from both inside and outside the United States.
The document specifically states that the coin would end up with “relatively little volatility,” considering the “underlying portfolio” and the net asset value of the Arca UST coins. Even though there is a chance that there could be more NAV volatility for the individuals that hold the Arca UST Coins, it “will be relatively limited.”
Investors in this fund stand to gain dividends as a result of interest payments. However, the fund ultimately wants to see the “maximum total return” while still preserving the capital. Bottom line – the company is prioritizing the stable value of the fund, rather than zeroing in on massive profits.
For a trader to purchase shares either from another investor or from the fund directly, the individual has to first create a wallet address, which has to happen on the Arca application. After whitelisting the wallet address, the users can participate on the Arca application by transferring money from a bank account to the fund, which will give them shares.
So far, there has not been any clarification over how many of the dollar-pegged tokens will be released by Arca for sale. However, the documentation submitted to the SEC says that the only way for this whole project to have viable options is by raising $25 million in funding.
To be clear, Arca is entirely separate from NYSE Arca, which is one of the many firms that are working to get a Bitcoin exchange-traded fund approved in the United States.