By remarkably coincidence, living shadows have been the topic of another well known science fiction story of late... That's right Fel!
Steven Moffat has been plagerising your work!
Minor point: If Danna choses to become a shadow fox arcan, this would mean there would be three SFA females, not two, as Shad would no doubt give Danna's 'humanity' to another vixen.
Hmm. We seem to be backsliding to the 'earth air fire water' system. Kyven is acting like all animal life is composed of Human, Animal, Monster and Spirit. (As opposed to oxygen, carbon, nitrogen, amino acids, DNA, and all that other boring stuff biologists harp on about.) There are any number of reasons why any particular alchemy technique might need a human to turn an animal into an arcan. As others have pointed out. Arcans can easily make new arcans; without any apparent affect on the human population. The ''genocide' method was probably used only because it was quick and cheap. There are probably other ways alchemy can do it; even if Shadow Fox doesn't know how.
Come to think of it, why is Shadow Fox using a crude technique, optimised for mass production, and which was invented by humans hundreds of years ago? Is this another restriction she/other spirits operate under? (No introducing new ideas?) Or is she/other spirits simply not very creative? Or is it just her? Cunning isn't the same as educated after all.
The spirits seem to view non-spirit magic in the same way the US views nuclear technology. (Bombs, fission/fusion plants - and also interesting rocket engines, medical scanners, cancer treatments, computers, solar power, etc.) That is to say they're rather schizophrenic on the subject ("Don't burn fossil fuels, but for gods sake don't use nukes either!") and would prefer no one else on the planet had any. Nor does the US government seem to understand that nuclear technology has more than two uses, or that knowledge is interconnected. If a country knows how to build a MRI scanner or treat cancer, they know enough to build a power-plant or bomb within a few years. If you deny them the latter, you deny them the former. I wonder how humanity and a more mature arcan culture would react when they realise the nature of the baby being thrown out with the bath water.
In context, once you know the underlying physics of how the a crystal lamp makes light, then you can work out how to convert light directly into magical energy. Would the spirit's prohibition against synthetic magic cover things like solar-magic panels? Or are they only worried about things like fission-magic reactors?