Ark Invest, a prominent investment management firm led by Cathie Wood, has made notable adjustments to its proposal for a spot Bitcoin ETF in response to comments and queries from the U.S. Securities and Exchange Commission (SEC).
These changes come after the SEC had previously raised concerns, and they mark a significant step towards the approval of a Bitcoin ETF.
ARK Invest addresses SEC comments with updated Bitcoin ETF proposal
In the updated proposal, Ark Invest clarified various aspects of its Bitcoin ETF, addressing the SEC’s primary concerns. Notably, the updated document delves into specific areas that include Coinbase’s custodial practices, net asset value calculation, illicit activity and environmental concerns, and a few others.
As noted by Bloomberg ETF analyst Eric Balchunas on X (formerly Twitter), the new application now includes insights into Coinbase’s custodial practices. It explicitly states that the trust’s assets are held in segregated addresses on the Bitcoin blockchain, ensuring that ETF assets remain separate from corporate and customer assets.
ARK has just filed an updated version of its spot bitcoin ETF prospectus. The SEC emailed issuers a few wks ago with comments/qs about their S-1 that they wanted addressed so is very poss ARK has answered all that in this filing. We looking thru it now.. pic.twitter.com/AlwTt82WU0
— Eric Balchunas (@EricBalchunas) October 11, 2023
This addition responds to the SEC’s previous criticism of insufficient surveillance-sharing agreements.
Moreover, the updated prospectus outlines that the calculation of net asset value (NAV) is not in accordance with generally accepted accounting principles (GAAP), also moving in line with the SEC’s previous comments on this matter.
The filing further acknowledges the potential impact of illicit activity on the value of the ETF. If cryptocurrencies are increasingly used in illegal transactions, or even perceived as such, it could lead to a decline in the ETF’s value. Additionally, the document addresses environmental considerations related to Bitcoin (BTC) mining, including government regulations, energy price fluctuations, and potential mining firm closures.
Next Steps
While these changes are a positive step, the road to SEC approval may still include further discussions on specific details. ETF specialist Eric Balchunas anticipates additional back-and-forths between Ark Invest and the SEC, suggesting that approval may not be imminent. However, the fact that these conversations are happening is a sign of progress.
Ark Invest initially submitted its application for a spot Bitcoin ETF in March 2023, in partnership with 21Shares. The ETF aims to track the performance of Bitcoin (BTC) through the S&P Bitcoin Index and would be directly backed by Bitcoin holdings.
The SEC has been critical about approving spot Bitcoin ETFs, primarily due to concerns about market manipulation and investor protection. Other firms, including BlackRock and Fidelity Investments, have also filed applications for spot Bitcoin ETFs, making it unclear when the SEC will make a final decision.
