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The Securities and Exchange Commission (SEC) has submitted a request to delay its decision regarding the approval or rejection of the Ark 21Shares Bitcoin ETF for listing on BZX.
This represents the agency’s initial postponement concerning the recent series of Bitcoin spot ETF applications, potentially suggesting a similar temporary outcome for competing applicants.
Public Inquiries
In its letter issued on Friday, the SEC expressed its desire for public feedback on BZX’s application, which aims to list the first Bitcoin spot ETF on a U.S.-regulated exchange.
“Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change,” stated the SEC. “Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved.”
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Initially, the agency sought the public’s opinions on whether the proposed ETF would be safeguarded against “fraudulent and manipulative acts and practices,” and whether the Bitcoin market is inherently prone to manipulation. This concern is central to the agency’s reluctance to approve a Bitcoin spot ETF thus far.
Previously, ETF applicants have attempted to establish surveillance-sharing agreements with the CME Bitcoin Futures market to satisfy the SEC’s market oversight requirements. However, regarding ARK’s earlier applications as well as those from Grayscale, the SEC has maintained that this market does not fulfill its criteria.
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This leads to the agency’s second public inquiry: “Do commenters agree with the Exchange that the CME, on which CME Bitcoin Futures trade, represents a regulated market of significant size related to spot bitcoin?” inquired the SEC. The regulator specifically wants to determine if an individual attempting to manipulate the Bitcoin market would necessarily need to trade on the CME.
The SEC’s final question addressed Coinbase – the largest spot Bitcoin exchange in the U.S., and ARK’s newly chosen surveillance-sharing partner. Eight competing applicants have identified the same exchange in their latest filings, following the examples set by both Fidelity and BlackRock.
“Do commenters agree with the Exchange’s assertion that such an agreement with Coinbase would be “helpful in detecting, investigating, and deterring fraud and manipulation in the Commodity-Based Trust Shares”?” inquired the SEC.
Upcoming Deadlines
Following ARK, the next approval deadlines for competing Bitcoin spot ETFs are scheduled for early September, including BlackRock’s – but decisions on those applications may also be similarly postponed.
ARK’s ultimate deadline, beyond which the SEC can no longer delay its decision, is January 10. Given its nearly identical structure to its competitors, ARK Invest CEO Cathie Wood anticipates that its approval will also lead to that of rival firms – likely all at once.
Before this, Grayscale expects to receive a ruling in its lawsuit against the SEC by the end of September. Bloomberg ETF analysts suggest that this lawsuit remains the most probable pathway to spot ETF approval.
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