SEC Delays Decision on Spot Bitcoin ETF

ARK/21Shares verdict, a potential watershed in cryptomarkets, was slated for Aug. 13.

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Finance Reporter
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Reviewed by: Lisa Barr
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Edited by: Ron Day

U.S. regulators delayed a decision to approve or deny a spot bitcoin ETF, days before a deadline to render a verdict on an application from Cathie Wood’s ARK Investment Management and putting off what will likely be a watershed for cryptomarkets. 

The Securities and Exchange Commission extended its review of a joint application from ARK/21Shares and sought public comment on a rule change required to permit the creation of the new fund, according to the filing. The deadline to approve or deny the application was originally Aug. 13. 

Crypto investors and fund companies eagerly anticipate the decision after more than 70 spot bitcoin exchange-traded fund applications have been denied over the past decade. This year has seen a slew of new and revised applications from BlackRock Inc., Fidelity Investments and more, with new security features added with an aim at winning over a skeptical SEC. 

Wood in recent weeks has maintained that her firm held the lead position for approval. The ARK/21Shares application was the first joint filing for a so-called spotcoin in June 2021—an ETF that tracks physical bitcoin as opposed to bitcoin futures contracts. The companies in a statement held out the possibility for amendments to their application. 

“We are committed to BTC, whether it is in spot or futures form, and we believe there is a robust market for both types of products,” the firms wrote in a statement, using the BTC bitcoin abbreviation. “As the regulatory environment changes, we are committed to evaluating, launching, and amending products to provide efficient ways to access bitcoin in the US market.” 

 

Spot Bitcoin ETF, Bitcoin Futures Funds 

While the SEC has allowed ETFs that track bitcoin futures, such as the ProShares Bitcoin Strategy ETF (BITO), the agency has thus far rejected ETFs that track physical bitcoin due to concerns about investor protection and market manipulation.  

The regulator is seeking responses to four questions, with three of them concerning market manipulation and the reliability of so-called surveillance agreements. It also asked if the CME, where bitcoin futures trade, “represents a regulated market of significant size related to spot bitcoin.”  

The SEC also wrote in the filing that it needed more time to evaluate ARK’s application. Bloomberg ETF analyst James Seyffart downplayed any significance to the delay, and in a series of tweets declined to say if this was a positive or negative development for applicants. “This is a standard delay letter,” he tweeted. 

The agency opened a public comment period for the rule change, asking public commenters to focus their statements on the agency’s central questions about the asset’s vulnerability to fraud.  

Aisha Hunt, an attorney at Kelley Hunt & Charles, said the delay is “no indication that the SEC staff has changed their position on spot bitcoin initiatives.” 

Wood Predicts Approval of All ‘Spotcoin’ Applications 

Wood said on Bloomberg TV on Aug. 7 that she expected the SEC to extend its review period of her firm’s ETF. She also predicted that the regulator would approve all so-called spotcoins at once:  

“Most of these essentially will be the same, so it will come down to marketing [and] communicating the message.” 

A key decision that might push the SEC to adopt spot bitcoin is if Grayscale wins its lawsuit against the agency for blocking its conversion of the GBTC bitcoin trust into an ETF. Bloomberg analysts recently gave Grayscale a likely chance of winning in court. Bloomberg Intelligence raised its odds of a spot bitcoin approval to 65% from 50% on Aug. 2.  

 

Contact Lucy Brewster at [email protected] 

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.