United States-based investment firm Arca Funds is attempting to gain regulatory approval to issue digital securities. This news comes via a filing on the United States Securities and Exchange Commission’s (SEC) official website on April 12th.
With their application, Arca hopes to issue its Arca UST Coins, which will be ERC-20 compatible tokens that will settle on the Ethereum blockchain. The coins will be digital securities that represent shares of Arca’s portofolio, which will be comprised mainly (80% of the fund) of United States Treasury securities, including “bills, bonds, and notes” — a stable, low risk investments. The fund will be “closed-end,” meaning no additional shares will be issued after the initial offering.
In its filing, Arca describes its investment objective as “seek[ing] maximum total return consistent with preservation of capital” — an intention that could be applied to just about any fund. The initial net asset value (NAV) of its tokens will be exactly $1, which means that the fundamental value shares will be one U.S. dollar. However, with their investments in U.S. Treasury vehicles, that value will change — hopefully, more Arca token holders, in a positive direction — but most likely not by too much, given the stability of the government issued-securities the fund will invest in. Indeed, Arca acknowledges this fact in their filing, saying their coins “will have relatively little volatility” to the point where they refer to their token as a “stablecoin” throughout the prospectus. However, they also note that “Arca UST Coins could experience greater NAV volatility compared to typical stablecoins” given it is not exactly backed by U.S. dollars, but instead by investments.
Arca goes on to note that its coins will not be listed on any traditional exchange or decentralized exchange. Instead, investors will only be able to transact in a peer-to-peer capacity.
The minimum investment for shareholders to invest in the fund will be $1,000.