Los Angeles-based investment firm Arca is launching the “Arca U.S. Treasury Fund,” a digital securities fund registered with the U.S. Securities and Exchange Commission (SEC), built on top of the Ethereum blockchain.
The shares are called “ArCoin,” and the fund is the first product registered under the Investment Company Act of 1940 to be offered as a digital security. This is notably the first time the SEC approved a fund based on blockchain technology.
The regulator has been well-known in the cryptocurrency space for repeatedly rejecting bitcoin exchange-traded funds (ETFs). Rayne Steinberg, Arca’s CEO, commented:
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.
Forbes reports the fund will provide interest payments every quarter. The interest will be generated as at least 80% of the assets in its portfolio will be short-term Treasury securities. Assets that are not invested in these securities will be moved to cash, cash equivalents, investment-grade fixed-income securities, or assets Arca determined are of comparable quality.
As the fund is looking to invest in low-risk assets, the net asset value (NAV) of ArCoins is expected to stay relatively stable. The fund will nevertheless provide daily NAV reports, bankruptcy protections, periodic audited financial statements, and assets held in a statutory trust.
The Arca U.S. Treasury Fund was likely approved to be launched on the Ethereum blockchain because it uses the ERC-1404 token standard, which restricts token holders so they can only transact with whitelisted addresses, ensuring the shares are never out of regulatory oversight.
The ERC-20 token standard most tokens launched on the ETH blockchain use, on the other hand, are not restricted and can be moved to any address on the cryptocurrency’s blockchain.
Featured image via Pixabay.
