Startup Arca Seeks SEC Approval for US Treasury Bond-Backed Stablecoin

Arca Investment Management is seeking approval from the SEC to sell a new type of stablecoin to retail investors.

AccessTimeIconApr 16, 2019 at 2:50 p.m. UTC
Updated Sep 13, 2021 at 9:04 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Arca is seeking regulatory approval to sell a new type of stablecoin to retail investors.

The Los Angeles-based digital asset manager filed a prospectus with the Securities and Exchange Commission (SEC) Friday for a bond fund whose shares would be tokenized on the ethereum blockchain.  Arca hopes the SEC will approve the product later this year, a spokesperson said.

The Arca U.S. Treasury Fund would be available to the general public, but not traded on any stock exchange or alternative trading system, according to the filing.

However, shares in the fund (referred to as "Arca UST Coins") would be represented as ERC-20 tokens, which run on top of ethereum. And Arca is framing the product as a form of stablecoin, or cryptocurrency designed to maintain parity with a traditional asset like the U.S. dollar, although the company cautioned that it may be slightly less stable than other such products on the market.

The minimum investment in the fund would be $1,000, with a target net asset value (NAV) of $1 per share. At least 80 percent of the fund would be invested in U.S. Treasury securities, with the rest in debt issued by various public or private entities inside and outside the U.S.

"It is therefore anticipated that the underlying portfolio, and the NAV of Arca UST Coins, will have relatively little volatility," the document says. "Accordingly, although holders of Arca UST Coins could experience greater NAV volatility compared to typical stablecoins, such volatility will be relatively limited."

Investors would receive quarterly dividends from the interest payments, according to the prospectus, although the fund's "investment objective is to seek maximum total return consistent with preservation of capital." In other words, stable value rather than big profits.

To buy shares from the fund or from another investor, traders "must first establish a wallet address through the Arca application and ensure that it is whitelisted with the Transfer Agent," according to the prospectus. "Once an investor’s wallet address is whitelisted, the investor can use the Arca application to transfer money from a linked bank account to the Fund in return for shares of the Fund."

It is not clear how many of these purportedly dollar-pegged tokens Arca aims to sell; the prospectus says the offering would need to raise $25 million for the fund to have viable operations.

Arca is not to be confused with NYSE Arca, one of several firms seeking to launch a bitcoin exchange-traded fund (ETF) in the U.S.

U.S. Treasury bond image via Shutterstock.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.