Arca has announced the availability of an SEC-registered fund offering digital assets. (AP … [+]
Investment manager Arca has announced the Arca U.S. Treasury Fund, the first-ever product regulated under the Investment Company Act of 1940 to offer digital securities.
The fund, which leverages the ethereum blockchain, will offer shares known as ArCoins, which will provide investors with interest payments on a quarterly basis.
The Arca U.S. Treasury Fund will produce these regular interest payments by investing at least 80% of its assets into a portfolio of short-term Treasury securities.
Any assets that are not invested in Treasury securities will go into cash, cash equivalents, investment-grade fixed-income securities or unrated assets that Arca has determined are of comparable quality.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Because the fund plans to invest in low-risk assets, the net asset value (NAV) of ArCoins is expected to stay relatively stable.
This NAV will be struck at $1.00 at 4 p.m. EST today, at which point 100 million units of ArCoin will become available.
While the fund does not plan to invest in any digital assets, investors will be able to trade units of ArCoin peer-to-peer via the Ethereum blockchain.
Further, financial institutions could potentially use these digital assets for a wide range of use cases, including payments, lending, clearing and settlement, trading and treasury management.
Arca has also revealed that it plans to release more financial products that are regulated under the Investment Company Act of 1940.
Jerald David, president of Arca Capital Management, weighed in on the implications of this new fund and its digital shares.
“We believe the launch of the Arca U.S. Treasury Fund is an important milestone for the digital currency/blockchain space for several reasons,” he stated.
“On a high level, it is the first time that the blockchain will be integrated into an SEC-registered fund’s framework.”
“Shareholders can directly transfer ArCoin using blockchain technology; other features of blockchain are being used for fund operations, such as freezing and replacing tokens for investors that have lost their public keys, and using smart contracts on the blockchain to enforce transferability of ArCoin to only whitelisted ETH addresses,” David noted.
In addition, the fund will offer benefits like “full replacement of ArCoin if public keys are lost or compromised, the ability to track transactions that are published on the Ethereum blockchain on a real-time basis, and no need for a financial intermediary like a broker since investors can purchase ArCoin directly,” he stated.
“This paves the way for investors to potentially use ArCoin within their daily business operations in many of the use cases we’ve been developing, including clearing and settlement, lending, treasury management, payments and insurance.”