SEC delays approval of ARK Invest’s Bitcoin ETF

Category: Blockchain Regulatory
Posted by Content Team

The U.S. Securities and Exchange Commission (SEC) has delayed approving the spot Bitcoin exchange-traded fund proposed by Ark Investment Management.

Initially, the SEC had scheduled a decision date for August 13. However, given the agency’s call for public comments on the Ark 21Shares Bitcoin ETF application, the process could extend until 2024. ARK Invest submitted its application back in May.

The SEC wants to hear specifically from interested parties about whether a spot Bitcoin ETF could be manipulated and if the liquidity and transparency in the Bitcoin market are enough to prevent this.

The Ark 21Shares Bitcoin ETF aims to follow Bitcoin’s performance, using data from the S&P Bitcoin Index sourced from different crypto exchanges. The fund would hold Bitcoin directly and be listed on the Cboe BZX Exchange.

Earlier this month, Cathie Wood anticipated that the proposal from her firm and 21 Shares would face a delay by the SEC, as she mentioned in an interview with Bloomberg.

I think the SEC if it’s going to approve a Bitcoin ETF, will approve more than one at once,” the ARK Invest CEO and CIO added.

In recent years, the regulator has turned down numerous applications for spot bitcoin ETFs, including those from ARK, due to concerns about insufficient trading surveillance. This could potentially expose the underlying spot market to fraud and manipulation.

Yet, ETFs based on bitcoin futures, which follow the price of bitcoin futures contracts, have been permitted by regulators since October 2021.

Applications from other companies

Other prominent entities like BlackRock and WisdomTree have also submitted applications. Crypto investment firm Grayscale is awaiting a court ruling as the SEC has consistently rejected its bid to transform the Grayscale Bitcoin Trust into an ETF.

BlackRock, the biggest asset management firm globally, submitted an application for the launch of the iShares Bitcoin Trust. If granted approval, this ETF would offer investors a convenient way to invest in cryptocurrency through a product from a major Wall Street company.

The Shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange,” reads the filing.

Later on, the company included a “surveillance-sharing agreement” with cryptocurrency exchange Coinbase. This followed reports that the SEC might be more willing to consider an ETF application with such an agreement.

WisdomTree’s recent filing in June isn’t their first attempt at a Bitcoin ETF application. However, WisdomTree’s global chief investment officer Jeremy Schwartz believed this attempt could yield a different result.

We’ve been able to successfully launch products in Europe,” Schwartz said on CNBC’s ETF Edge. “The European regulators have been more friendly, and they’ve been able to get comfortable with the mechanisms, the custodians [and] how the markets work.”

The SEC declined WisdomTree’s earlier applications in 2021 and 2022, as they found these applications lacking in adequately protecting investors and serving the public interest.

In July 2013, Gemini co-founders Cameron and Tyler Winklevoss were among the first to apply for a crypto exchange-traded product listing with their Bitcoin Trust. The SEC rejected their application due to the limited understanding of digital currencies among regulators at the time.

Other major asset management companies, such as Bitwise Asset Management, VanEck, Invesco, Galaxy Digital, Fidelity, and Valkyrie, have spot Bitcoin ETF applications currently being reviewed by the SEC.