Cryptocurrency integration with the regulated investments space may soon become a reality if a filing by Arca Funds with the SEC is successful.
The Los Angeles based fund manager wants to create a digital token dubbed ‘ArCoin’ built on Ethereum and backed by government T-bills which they plan to acquire with investors’ monies. This will be the first Blockchain Traded ETF (BTF) if Arca manages to convince the SEC its product is any better than previously rejected crypto-pegged assets.
Arca Funds is eyeing the $17 Trillion U.S government bond market but with a different approach from traditional finance. The firm has since set out to leverage blockchain technology as the bridge between payments and investment vehicles. Rayne Steinberg, Arca’s CEO, however noted that this concept is fairly new and the target market should expect some challenges like low liquidity along the way;
“Investors should therefore initially expect greater price volatility in the secondary market than would be the case if the shares had greater liquidity.”
This innovation by Arca is meant to make easier the access of access risk conservative bonds offered by the U.S government. With Blockchain tech as the core building network for ArCoin operations; one can simply transfer their T-bill backed digital currency via the Ethereum blockchain. In its filing with the SEC, Arca outlined ERC 1404 as the compatibility standard;
“The ERC-1404 standard allows shareholders to interoperate with the entire ethereum ecosystem with added functionality that allows the fund to enforce transfer restrictions within the ArCoin smart contract.”
Is there an Opportunity?
Besides the looming uncertainty on an SEC approval, Arca is optimistic that its strategy will cater for institutional clients looking to join the crypto market. Steinberg mentioned that;
“When you talk about why there's not more institutional adoption in crypto, it's because there aren't institutional-grade products as they would think of them.”
Arca has therefore positioned itself as the institutional friendly crypto fund manager. In addition, the company is banking on its choice of stable assets to win the SEC’s favor. As it stands, DTAC LLC is the proposed transfer agent of Arca’s Fund while Ohio based bank, Fifth Third, is set to be the custodian. Previous Bitcoin ETF filings have been rejected by the regulator citing a probability of market manipulation. Could the stability backed approach by Arca convince the SEC otherwise?