ARK Invest and 21Shares have decided to remove the crypto staking feature from their previously proposed Ethereum (ETH) exchange-traded fund (ETF) structure. This decision follows successful discussions with the U.S. Securities and Exchange Commission (SEC), leading to a transition to a cash creation and redemption model for the ETF.

The shift signifies a significant pivot from the initially considered in-kind redemption model, where non-monetary payments such as Ether were utilized. Under the revised cash-creation model, ARK Invest and 21Shares will now purchase Ether corresponding to the order amount and deposit it with the custodian, facilitating the creation of ETF shares.

In a recent filing submitted on May 10, the section indicating that 21Shares would stake a portion of the fund's assets through third-party providers was removed. Previously, the filing mentioned the possibility of staking through trusted providers and intended to classify the staking rewards as income generated by the fund.

Eric Balchunas, a crypto analyst with Bloomberg, commented on the development, stating, "Here we go again. ARK/21Shares has just filed an amended S-1 for their spot Ether ETF, looks like they updated to be only cash creations and some other things that bring it in line [with] the recently approved spot BTC ETF prospectus."

The updated filing retains broader discussions, such as potential losses due to slashing penalties, temporary inaccessibility of funds during bonding and nonbonding, and the potential impact on Ethereum's price.

The decision to eliminate staking from the ETF structure aligns with the regulatory preferences demonstrated in the recent approval of the spot Bitcoin ETF. By adopting a cash-creation model, ARK Invest and 21Shares aim to increase the likelihood of obtaining regulatory approval for their Ethereum ETF.

Despite the promising prospects of the spot Ether ETF, the Securities and Exchange Commission (SEC) has been experiencing delays in making decisions on various spot Ether ETF proposals. Proposals from industry giants like Grayscale, Franklin Templeton, VanEck, and BlackRock have all faced delays in the decision-making process.

The SEC is now tasked with making critical decisions on spot Ether ETF applications, with VanEck's spot Ethereum application deadline set for May 23 and the application from ARK Invest and 21Shares following closely on May 24. These decisions carry significant implications for the crypto investment landscape, as they could increase institutional participation and mainstream acceptance of Ether as an investable asset.

While ARK and 21Shares have removed the staking feature from their plans, other firms like Fidelity and Grayscale have integrated staking features into their Ethereum ETF applications. This move aims to tap into income opportunities within regulated finance while offering investors exposure to Ethereum's staking rewards.

As the SEC continues to evaluate the various ETF proposals, the crypto community eagerly awaits the regulatory body's decisions, which could shape the future of Ethereum and cryptocurrency investments within the traditional financial markets.