Is an SEC approval possible with ARK’s amended spot Bitcoin ETF

• The latest Bitcoin ETF application details how fund assets are “not commingled” with corporate or other customer assets.
• Analysts have noted how the latest filing addressed nearly all the concerns of the SEC.

On 11 October, Cathie Wood’s ARK Invest and 21Shares amended their joint spot Bitcoin [BTC] exchange-traded fund (ETF) application and submitted it to the U.S. Securities and Exchange Commission (SEC).

The latest application includes additional information on how the ETF would manage assets and determine asset values. It also details how assets for the fund are held in segregated wallet addresses on the Bitcoin blockchain. It also noted that ETF assets are “not commingled” with corporate or other customer assets.

The SEC previously criticized spot Bitcoin ETF applications for insufficient surveillance-sharing agreements (SSAs). In response, ARK Invest and 21Shares included an SSA in an amended application filed in June.

The agreement was a joint effort of ARK Invest, 21 Shares, the Chicago Board Options Exchange (CBOE) BZX Exchange, and a crypto platform. The filing didn’t specify the crypto platform though.

It, however, asserted that the platform accounted for a “substantial portion of US-based Bitcoin trading.”

Addressing SEC’s concerns

Eric Balchunas, a senior Bloomberg ETF analyst, noted that it’s very possible that the latest ETF application addressed all the concerns of the SEC.

He also referred to a section where the application underlined that certain valuation methods that the aforementioned ETF used were not in line with generally accepted accounting principles (GAAP) in the U.S.

Ok here’s one change, under NAV calcs (which is something we heard the SEC commented on) the new prospectus has stuff on how the NAV calc is NOT in accordance with GAAP accounting. Good eye by @JSeyff pic.twitter.com/jdINXQjKrd

— Eric Balchunas (@EricBalchunas) October 11, 2023

Balchunas remarked that with this application, ARK Invest and 21Shares has put the ball back in the SEC’s court. It’s possible there will be a few “back and forths” between the applicants and the regulator over these details.

Scott Johnsson, General Partner and General Counsel at Van Buren Capital, was quick to respond to the above thread. He highlighted the mentions of risk factors affecting the fund in the amended application, viz., regarding illicit transactions, and negative environmental effects of crypto mining.

I mean, you know it’s probably the SEC when they make you put in two risk factors for illicit transactions and negative environmental effects of mining pic.twitter.com/tu2Sxe0ySf

— Scott Johnsson (@SGJohnsson) October 11, 2023

Notably, ARK Invest and 21Shares first filed for a joint spot BTC ETF in 2021. Since then, the SEC has time and again denied all of its applications.