A recent amendment to the joint spot Bitcoin (BTC) exchange-traded fund (ETF) application by ARK Invest and 21Shares has been seen as a positive sign of progress and upcoming approvals. The amendment, filed on October 11, provides additional information about the proposed ETF, specifically addressing concerns raised by the Securities and Exchange Commission (SEC).
According to Bloomberg senior ETF analyst Eric Balchunas, the changes made by ARK in response to the SEC’s comments indicate that the company has addressed all the concerns raised by the regulator. Balchunas views this as a positive sign and solid progress towards getting the ETF approved. He mentioned that the changes are “sprinkled throughout” the new filing, making it five pages longer. However, he also emphasized that none of the comments were particularly new or insurmountable.
One notable change highlighted in the amendment is ARK’s acknowledgment that the fund’s net asset value (NAV) calculations are not in line with the Generally Accepted Accounting Principles (GAAP) used by the SEC. This clarification aims to ensure transparency and align the fund’s reporting with industry standards.
Additionally, the new filing clarifies that the ETF’s assets, held by Coinbase Custody, are kept in segregated accounts on the Bitcoin blockchain. This means that the assets are not mixed with corporate or other customer assets, providing greater security and protection for investors.
Fellow Bloomberg ETF analyst James Seyffart commented that this change indicates effective communication between ARK and other issuers with the SEC, addressing the regulator’s concerns. He believes that this is a positive sign for future approval of the ETF.
Scott Johnsson, general partner at Van Buren Capital, noted another notable addition in the amendment. It highlights the potential risks associated with BTC being used for illegal activities and the environmental impact of Bitcoin mining. The disclosure acknowledges that if BTC’s usage becomes more restricted due to these factors, it could negatively impact the value of the ETF.
Johnsson believes that based on ARK’s amendments, the SEC does not seem to be imposing unnecessary roadblocks during the review process. He sarcastically mentioned that the inclusion of the “electricity usage” risk factor may have been a result of a conversation with the SEC attorney, highlighting the importance of addressing material risks.
Overall, the amended filing by ARK Invest and 21Shares reflects their efforts to address the SEC’s concerns and demonstrate transparency. The changes made in the document provide clarity regarding asset custody, valuation methodologies, and potential risks associated with Bitcoin. This progress is seen as a positive step towards obtaining approval for the ETF.