This week, Arca Funds announced it will seek regulatory approval to begin tokenization of US Treasury Bonds. Importantly, this filing isn't the first time Arca sought SEC approval for a new blockchain-based platform. The news showcases the further integration of blockchain technology into the traditional financial sector, as well as, further determination on the part of Arca Funds to bring their products to the market.
The Los Angeles-based fund management firm, Arca Funds, seeks to provide investors with a modern alternative to the current outdated Treasury Bond systems in use. The firm believes that only tokenization can provide more efficiency in the market. As such, Arca Funds hopes to capture a majority share of the tokenized bonds sector moving forward. This strategy puts Arca Funds in a profitable situation. According to a recent report by Morningstar, there is approximately $330 billion of funds devoted to investing in government bonds, dominated by U.S. Treasuries.
As it stands now, Arca's SEC filing represents a major milestone in the market. If successful, Arca would become the first tokenized fund to be fully authorized under the Investment Company Act of 1940. Consequently, the platform could offer its service to most U.S. traders.
Arca executives labeled the new financial instrument a blockchain-traded fund. Importantly, the new technology provides faster transactions than Wall Street’s current market systems. Additionally, it eliminates many of the middlemen. For example, the current system requires you to buy bonds from a broker or acquire shares in a fund. All of these third-parties increase the cost of your transactions.
Pay for Goods?
Interestingly, developers envision a day in which you could pay for goods or services using the Treasury-fund tokens. Discussing this possibility in the very near future, Arca CEO Rayne Steinberg spoke on how technology makes it possible to “collapse the space between payments and investment vehicles.”
Investors in the Arca Fund receive ArCoins for their participation. These coins reside on the Ethereum blockchain network. Specifically, the tokens are the popular ERC-1404 standard. As such, they provide users with the highest level of interoperability within the Ethereum ecosystem
Arca Funds Partners
As part of the strategy, Fifth Third Bank, one of the largest banks in Ohio, agreed to function as the custodian for the tokens. Also, DTAC LLC signed on as the platform's transfer agent. Importantly, DTAC is a subsidiary of TokenSoft, a major player in the tokenization market.
Unfortunately, Arca Funds has its work cut out for it. The SEC repeatedly denied EFTs to date. Importantly, Arca was part of a Bitcoin ETF filing last summer with Wilshire Phoenix. The firms were denied. Then, the firms filed again just last month. The SEC rejected the second filing on the grounds that Wilshire Phoenix had not proven the bitcoin (BTC) market is sufficiently resistant to market manipulation. The denial was met with discourse to the point that SEC Commissioner Hester PeirceHester Peirce published a dissent.
Arca Funds – Determination
Arca Funds continues to seek SEC approval to bring new and exciting financial tools to the market. Hopefully, in the near future, regulators will give the firm the fair attention it deserves. For now, these developers continue to pioneer new tokenization strategies.