TL;DR Breakdown
- The US SEC has put ARK 21Shares Bitcoin ETF approval on hold and opened a 21-day comment period to the public.
- Cathie Wood, founder, and CEO of ARK Investment Management, foretold the delay on Aug 7th.
- The regulator has, in recent years, rejected dozens of applications for spot bitcoin ETFs.
- Market regulators urge the SEC to consider the inherent vulnerabilities of Bitcoin and remain consistent in their rejection of spot Bitcoin-based ETFs.
Description
From the very start, it was clear that the crypto industry won’t have fair play with the SEC. According to a Friday filing by the regulator, the U.S. Securities and Exchange Commission (SEC) has delayed a decision on whether to approve the spot bitcoin exchange-traded fund (ETF) of Cathie Wood’s Ark Investment Management (ARK). According … Read more
From the very start, it was clear that the crypto industry won’t have fair play with the SEC. According to a Friday filing by the regulator, the U.S. Securities and Exchange Commission (SEC) has delayed a decision on whether to approve the spot bitcoin exchange-traded fund (ETF) of Cathie Wood’s Ark Investment Management (ARK).
According to reports, the SEC is asking for public feedback on the Ark 21Shares Bitcoin ETF application and has postponed a decision by several weeks to potentially several months. Originally, a decision was scheduled for August 13.
In a notice dated August 11 and published in the Federal Register, the SEC opened a 21-day comment period for the ARK 21Shares Bitcoin ETF to the public. This is the latest delay in the regulator’s decision to approve or reject a spot crypto ETF in the United States.
In May, ARK submitted an application to list the ETF, giving the SEC a maximum of 240 days, or until January 2024, to reach a final decision.
ARK Investment Management seeks a listing on the Cboe BZX Exchange, which requires proof of a “comprehensive surveillance-sharing agreement in place with a regulated market of significant size.”
The SEC has previously rejected the company’s crypto ETF proposals on the grounds that they would not be “designed to prevent fraudulent and manipulative acts and practices” or safeguard investors.
The regulated market of significant size test does not require that the spot bitcoin market be regulated in order for the Commission to approve this proposal, and precedent makes clear that an underlying market for a spot commodity or currency being a regulated market would actually be an exception to the norm.
SEC
Cathie Wood, founder, and chief executive officer of ARK Investment Management, predicted in an interview on August 7 that the SEC would delay its decision. She also predicted that the commission could approve multiple spot BTC ETFs simultaneously in the future.
Because most of these essentially will be the same, it will come down to marketing, communicating, the message […] We’re trying to get the word out there that our research is deep, and we’ve been doing it since 2015.
Cathie Wood
What is the Future of ETFs in America?
In recent years, the regulator has rejected dozens of applications for spot bitcoin ETFs, which are publicly traded investment vehicles that directly monitor the price of bitcoin, citing inadequate trading surveillance that could expose the underlying spot market to fraud and manipulation.
Nonetheless, regulators have allowed futures-based bitcoin ETFs that monitor the price of bitcoin futures contracts since October 2021.
In recent months, interest from major financial institutions has helped revive the crypto markets, which had been stagnant after a succession of high-profile firms, including Sam Bankman-Fried’s FTX, failed last year.
ARK Investment Management is one among many U.S. firms looking to list a spot crypto ETF on a regulated exchange. BlackRock, the largest asset manager in the world, also filed for a Bitcoin ETF in June, a move viewed by many as a game-changer for the industry.
Following reports that SEC officials could be more receptive to accepting a spot crypto ETF under these conditions, a number of firms modified existing applications to include crypto exchange Coinbase as a surveillance-sharing partner.
Grayscale is currently engaged in a legal dispute with the SEC over the latter’s refusal to permit the listing of its Bitcoin trust as a spot Bitcoin ETF.
Scott Farnin, legal counsel for Better Markets, expressed strong reservations. Prior to the SEC’s recent decision, Farnin stated that the proposals’ surveillance-sharing agreements were insufficient.
Farnin emphasized that Bitcoin is susceptible to manipulation, citing its inflated trading volumes, concentration, and reliance on a small number of individuals and groups. He emphasized that these characteristics make the proposed spot Bitcoin-based ETF exceptionally susceptible to abuse, thereby exposing investors to superfluous risks.
The principal beneficiaries of the crypto craze are the criminals who use it to facilitate ransomware, money laundering, and illegal conduct of all types. It is within this context that the SEC must evaluate the latest wave of Bitcoin ETF filings this month.
Scott Farnin
Farnin urged the SEC to take into account Bitcoin’s inherent vulnerabilities and to continue rejecting spot Bitcoin-based ETFs that do not meet statutory requirements.
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