Arca Funds, an institutional/high net worth investor – asset manager and fund creator for digital assets, has filed a registration statement with the Securities and Exchange Commission (SEC) for the Arca US Treasury Fund. The goal is to trade the security publicly, thus open to all investors.
The investment strategy is fairly straightforward as it expects to hold at least 80% of its assets in a portfolio of fixed income securities guaranteed by the US government or government-sponsored enterprises (GSEs). The balance will be invested in other types of fixed income vehicles. The Fund expects to have an average portfolio duration of around 8 years. The initial net asset value (NAV) is set at $1 with a minimum investment of $1000.00.
What IS interesting about this offer is the Fund will issue shares as digital securities on the blockchain. To facilitate this, “ARCA UST Coins” will be minted to function as a stablecoin. In this case, the reference asset will be the fund’s portfolio.
To pull from the Form N-2:
- Arca UST Coins issued by the Fund may be traded directly from one shareholder to another (“peer-to-peer transaction”) using a cryptographically-secured distributed ledger. Use of this type of distributed ledger is relatively new and is untested in the closed-end fund market. Shareholders may identify counterparties directly or through a public electronic peer-to-peer trading platform, to the extent one is available.
- Arca UST Coins may trade on an unregulated decentralized exchange (a “DEX”). Participants in a DEX may post their offers and bids for Arca UST Coins and the DEX’s electronic protocols, or smart contracts will handle order matching and settlement. The Fund’s shares are not currently available for trading through any DEX, but maybe in the future.
- The Fund may also make Arca UST Coins available for trading on a closed trading system that is registered with the Securities and Exchange Commission (“SEC”) as an alternative trading system (an “ATS”). In such case, only customers of a broker-dealer authorized to provide access to a particular ATS will be able to buy and sell Arca UST Coins on such ATS. The Fund has no current agreement to make its shares available for trading on any ATS, but may enter into such an agreement in the future.
- Due to the emerging nature of the use of distributed ledger technology in securities trading systems, the Fund anticipates that there will be limited liquidity in the Fund’s shares. Investors should, therefore, expect greater price volatility than would be the case if the shares had greater liquidity.
There will be a repurchase program where 5% to 25% of shares may be purchased each quarter. The Fund intends to begin repurchasing Arca UST coins at the end of the second full quarter.
Holders of Arca UST Coins may use electronic “wallets” to send and receive the Fund’s shares in peer-to-peer transactions without the use of a central clearing agency.
The preliminary prospectus is available here. This just hit the SEC today so it will be interesting to see how the SEC deals with this one especially since it is the first – even though many people view digital assets an inevitability.
Arca US Treasury Fund SEC Filing 11.19
Have a crowdfunding offering you'd like to share? Submit an offering for consideration using our Submit a Tip form and we may share it on our site!