Find Answers to Your Questions
Governance encompasses the processes and interactions of administering control of a system. This includes the careful balancing of leadership, diversity, and democratization. The digital asset ecosystem’s primary intention is to provide alternative governance solutions that enable greater autonomy over monetary transactions and decision-making. To learn more, read our white paper, ESG – Why Not GSE?
The Bitcoin blockchain was created as an alternative to centralized authorities within the financial system. Blockchain technology has the potential to challenge corruption, distribution of power, and centuries-old governance methods, enhancing them with transformative and collaborative frameworks. For more information, read DeFi Governance in Action.
The central purpose of decentralized governance is to provide users with greater financial freedom and impact. Decentralized governance facilitates a communal organizational framework rather than a top-down hierarchical structure, enabling equitable stakeholder inclusion and democratized decision-making. To learn more, read Decentralized Governance of Digital Platforms.
Good governance refers to the accessibility, management, and economics of a digital asset—fair token distribution, stable voting structures, transparency, and voter efficacy. These token elements help ensure stakeholder roles are appropriately balanced, protocol and constituent objectives are aligned, and decisions are executed objectively. Find out more about good governance in the article, How to Think About Good Governance.
At the beginning of 2022, Anchor stakeholders Arca and Polychain proposed token yield cuts to improve the protocol’s sustainability. Although Anchor ultimately declined the proposal, it showcased the power of collaborative ownership with a record-breaking voter turnout of more than 70%. This community engagement helped increase price performance and later inspired Anchor’s implementation of a similar proposal.
Governance tokens are typically granted to users upon joining a blockchain project, such as a decentralized autonomous organization (DAO). These tokens provide voting rights, which users may implement to present or influence proposals for product roadmap, hiring, and business decisions. To learn more about governance as it pertains to DAOs, read Decentralized Autonomous Organizations (DAOs) Explained.
Arca has identified three main digital asset types: cryptocurrency, pass-through, and asset-backed tokens. Governance tokens are a kind of pass-through token, whereby governance rights are granted to the token holders in addition to other benefits such as cash flow/dividends and reduced trading fees. To learn more about the broader digital asset landscape, view our Digital Asset Classification.
A decentralized autonomous organization, or DAO, is a blockchain-based, self-governing organization that enables participants to work toward a common goal on a trustless network. DAOs start with an idea, assemble participants based on a defined goal, and stimulate action by granting access, voting rights, and ownership to contributors in exchange for tokens of the underlying project. To learn more, read DAOs: An Institutional Guide to Decentralized Governance.
DAO members can pursue their goals of pooling capital, recruiting contributors, and compensating users/contributors with remarkable swiftness. Because blockchain technology is rooted in the internet, it eliminates accessibility restraints and geographic barriers, and encourages freely flowing ideas. To learn more about the potential advantages of DAOs, read Re-Envisioning Corporations: How DAOs and Blockchain Can Improve the Way We Organize.
Certain voting structures within DAOs, such as token-weighted or quadratic voting, may favor the inputs of initial and large token holders, making it difficult for new and small token holders to implement their ideas. Additionally, decentralization is challenging in its application; successful coordination and efficient governance depend on considered, methodical implementation. For more information, read The Merits and Pitfalls of Decentralized Autonomous Organizations.
Currently, there is little legal framework regarding DAOs and their classification. As DAOs gain prominence, regulators are likely to consider factors such as legal and financial compliance. Although DAOs represent groups working toward common goals, this does not relieve members of individual responsibilities. For more information, read Legal Issues Confronting Formation and Operation of a Decentralized Autonomous Organization (DAO).
Constructivist investing allows investors to directly influence a company by collaborating with management to offer improvement suggestions for greater profit generation. Within the digital asset ecosystem, structures such as DAOs provide a channel for opinion to all project stakeholders—founders, developers, token holders, and institutions. These members can directly influence a DAO’s trajectory. For more information, read Five Things: Constructivist Funds.
A blockchain transferred fund (BTF) is a registered ‘40 Act Fund that issues shares as digital asset securities on the blockchain. Such tokens represent ownership in the fund’s shares and can be issued, transferred, and redeemed on the blockchain. To learn more, read the white paper—Blockchain Transferred Funds: The New Frontier for Investment Funds.
Arca’s U.S. Treasury Fund is the first registered ‘40 Act Fund to issue a digital asset security, called ArCoin. This BTF typically invests a minimum of 80% of its assets in U.S. Treasury securities. Blockchain transferred funds are a regulated structure that can theoretically include any type of asset within the fund and issues its shares as digital asset securities. To learn about the first BTF, read about the Arca Labs journey.
Initially known as a security token, digital asset security is a digital representation of fractional ownership interests in an underlying asset or company that can be transferred among KYC/AML-approved investors. Digital asset securities must follow prescribed purchase and transfer guidelines and are subject to jurisdictional securities laws and applicable regulations. Find out more about digital asset securities here.
The digital asset ecosystem has expanded to include various types of assets—cryptocurrencies, asset-backed and pass-through tokens—with varying functionalities—store of value, medium of exchange, or pass-through value. Digital asset securities must pass the U.S. Supreme Court’s Howey test to be deemed a security. Watch the Regulation and the Howey Test conference video to learn more about the differences between tokenized securities and tokenized assets.
The primary benefits of blockchain technology—such as peer-to-peer transferability, immutability, and traceability—enable digital asset securities to have near real-time settlement, transaction transparency, fractional ownership, and the potential for greater liquidity and lower counterparty risk. For more information on tokenizing securities, watch Finance on the Blockchain: Pioneering the BTF.
Due to regulatory confines, digital asset securities can trade on alternative trading systems (ATSs), but not yet on exchanges. ATSs such as Oasis Pro, tZERO, Securitize, Symbridge, and INX are pioneering the digital asset security frontier. To learn more, watch this conference panel recording: “ATS Leaders - The Future of Digital Exchange.”
The issuance process for digital asset securities removes many of the intermediaries that traditional assets require. Because of the core features of blockchain, many of the connectivity functions provided by third parties are now unnecessary or can be strengthened by utilizing the technology. Review this Security Issuance Diagram to learn more.
Public blockchains provide access to open-source technology for participants to build and collaborate with the ecosystem; Ethereum is one such blockchain. A permissioned blockchain, such as Symbiont, is a controlled environment that allows tokens to exist in a closed setting where privacy is needed to protect information. Read more about how digital asset securities can be issued using different blockchains.
Industries with pricing disparities, limited liquidity, and operational inefficiencies stand to benefit from digital asset securities. The insurance and real estate industries are among the top sectors that we believe are ripe for disruption.
Barriers to entry for traditional institutions include regulatory uncertainty, compliance/legal costs, new risk management and governance processes, and the recruitment of technical talent. Listen to financial incumbents discuss their perspectives and the challenges they face on this conference panel.
A lack of regulatory oversight can lead to suboptimal outcomes, such as fraudulent ICOs. Appropriate regulation could create clarity, instill confidence in end consumers, lead to widespread adoption among institutions, and spur innovation in the asset class. Learn more about innovation and regulation.
This fund is an interval closed-end fund.
An investor should carefully consider the investment objectives, risks, charges, and expenses of the Arca U.S. Treasury Fund before investing. This and other information is available in the Fund’s prospectus, which should be reviewed carefully prior to investing. To obtain a prospectus, please call 1-888-526-1997.
Fund Risks
You may not have access to the money you invest for an extended period of time. • You may not be able to sell your shares at the time or in the quantity of your choosing regardless of how the Fund performs. • Investors should understand that the Fund's shares are not currently listed on or available for trading through a national securities exchange or any other exchange, and a market for trading on an exchange may never be available to investors. Except for individually negotiated peer-to-peer transactions, there is currently no secondary market for ArCoins, and no such market is expected to develop. • Because you may not be able to sell your shares at the time or in the quantity of your choosing, you may not be able to reduce your exposure to the Fund in a market downturn. • An investment in the Fund may not be suitable for investors who may need the money they invested in a specified timeframe. • The amount of any distributions the Fund may pay is uncertain. There is no assurance that the Fund will maintain a particular level of distributions, nor is there any guarantee that the Fund will make distributions at any particular time. • Due to the emerging nature of blockchain use in securities transactions, the Fund anticipates that (other than monthly repurchase offers as described below) there will initially be limited to no liquidity in ArCoins due to low or no volume in peer-to-peer transactions. Investors should therefore initially expect greater price volatility in the secondary market than would be the case if the shares had greater liquidity. • The Fund will not invest, directly or indirectly, in digital assets, including digital securities. • Although shareholders can engage in peer-to-peer transactions using blockchain technology, the Transfer Agent will maintain the official record of the Fund's shareholders.
Arca Capital Management, LLC dba “Arca Labs” serves as adviser to the Arca U.S. Treasury Fund, distributed by UMB Distribution Services, Member FINRA/SIPC. Arca and UMB are not affiliated.
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