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(Kitco News) - In a move that was widely expected by analysts, the Securities and Exchange Commission (SEC) has delayed its decision on the ARK 21Shares Bitcoin (BTC) ETF application and instead opened a 21-day comment period to the public to get feedback on the investment product.
According to a notice filed by the SEC on Friday, the regulator is specifically seeking comments on the amendment added by the Cboe exchange in July that named Coinbase as the surveillance sharing agreement partner for the ETF, referred to as “Amendment No. 3.”
“The Commission is instituting proceedings to determine whether the proposed rule change, as modified by Amendment No. 3, should be approved or disapproved,” the SEC filing said. “Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. [The] institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to provide comments on the proposed rule change, as modified by Amendment No. 3.”
“The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal” over the next 21 days, the notice said.
Anyone wishing to file a rebuttal to any submission has a 35-day period, meaning the process will likely extend for at least another month.
In June, the SEC said it would either “approve or disapprove, or institute proceedings to determine whether to disapprove” the application by Aug. 13. Since that date falls on a Sunday, it was widely expected that the regulator would make its announcement by the end of the day Friday.
“I think you're probably right that Aug. 13 will come and go,” ARK CEO Cathie Wood said during an interview with Bloomberg Television on Monday. “I think the SEC, if it's going to approve a bitcoin ETF, will approve more than one at once.”
“Because most of these essentially will be the same, it will come down to marketing, communicating, the message” to see how they do, she added. “We're trying to get the word out there that our research is deep, and we've been doing it since 2015.”
ARK originally filed to list the ETF in May, which gives the SEC a maximum of 240 days, or until January 2024, to reach a final decision.
In response to the notice, James Seyffart, an ETF analyst with Bloomberg Intelligence, said, “This is a STANDARD delay letter. There's some confusion but only the first few paragraphs of this letter are written by the SEC and it's very standardized. The rest is just a copy-paste of the 19b-4 application written by CBOE (& Ark/21Shares). There isn't much to read into here IMO.”
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According to Terrence Yang, Managing Director at Swan Bitcoin, the delay was expected as little has changed in terms of preventing Bitcoin price manipulation, which has been the primary reason the SEC denied previous spot BTC ETF applications.
“The crypto lawyers I respect and I fully expected SEC’s delay of ARK’s Bitcoin ETF,” Yang said. “After all, what’s changed? The SEC repeatedly denied all spot Bitcoin ETF applications because foreign (read: Chinese) exchanges with fake and manipulated trading activity would mislead American investors about the true market price and volume for Bitcoin.”
“Cathie said earlier this week all Bitcoin ETFs should be approved at once, but that doesn’t affect the SEC’s decision here, because there is still a more than a significant amount of Bitcoin price manipulation and wash trading by, IMHO, Chinese exchanges,” he added. “SEC wants mechanisms in place to be able to detect fraud. Having Coinbase as a pricing source in ARK’s surveillance-sharing agreement helps, but it only really works if crypto is cleaned up first. That’s what the Chinese and US governments are doing, in going after Huobi, Binance, Tron, etc. Bitcoin is a global asset. There is just too much Bitcoin price manipulation right now.”
Felix Shipkevitch, a fintech regulatory attorney and Special Professor at Hofstra Law School, told Kitco Crypto that “it's not surprising that the SEC is prioritizing the review of applications of large financial institutions (FI), BlackRock and Fidelity, over ARK. If we are likely to see a BTC ETF get the SEC's blessing, we are more likely to see it for the bigger FIs.”
Kent Halliburton, President of Bitcoin mining company Sazmining,also aligned with this outlook, saying, “Despite having approved a futures-based Bitcoin ETF some time ago, the SEC has continued to drag its heels on approving a spot Bitcoin ETF. All eyes are now on the BlackRock ETF application to see what the SEC will do next.”
The SEC currently has at least eight spot BTC ETF applications on its docket for review, including products from BlackRock, Fidelity, VanEck, WisdomTree, Bitwise and Invesco.
