[NEWS] ARK Invest amends Bitcoin spot ETF application in response to SEC criticism

Major US hedge funds ARK Invest and 21Shares have amended their joint application for a Bitcoin spot ETF.

The aim of this is to correct concerns raised by the US Securities and Exchange Commission (SEC) and increase the approval rate.

The SEC recently postponed its decision on the final review of the Bitcoin spot ETF submitted by ARK Invest and 21Shares. The deadline is around January 10, 2024.

As this is the earliest review result among those applying for a Bitcoin spot ETF, it could become the standard for other companies' Bitcoin spot ETF applications, such as BlackRock and Fidelity, the world's largest asset management companies.

Eric Balchunas, an ETF analyst at Bloomberg, pointed out on X (formerly Twitter) that the revised content added comments on the custody practices of the cryptocurrency exchange Coinbase.

Specifically, it states that the fund's assets will be stored in a segregated address on the Bitcoin blockchain and that ETF assets will not be commingled with corporate or customer assets.

The SEC previously criticized Bitcoin spot ETF applications for insufficient oversight sharing arrangements. To address these SEC concerns, some applications incorporated the agreement with Coinbase through amendments filed in July.

The amended application also noted that certain valuation methods used by the fund do not comply with generally accepted accounting principles (GAAP) in the United States.

Scott Johnsson, general partner and general counsel at financial associate firm Van Buren Capital, noted that the amended application "contains comments about illegal activity." According to the application, the value of the ETF may decline when crypto assets are used or are perceived to be used for illegal transactions.

Johnson also addressed the section on Bitcoin mining and electricity consumption. The filing acknowledges that the environmental impacts of mining, government regulation, changes in energy prices, and the closure of mining companies could affect the price of Bitcoin and reduce the value of the proposed ETF.

On the 29th of last month, the SEC requested more extensive comments on the proposal from BlackRock, Valkyrie, InvescoGalaxy, and BitWise.

ArkInvest was not subject to the request at the time, but said it considered the concerns expressed by the SEC and responded by amending its filing based on the information.

References:Eric X, Johnson X
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