SEC postpones verdict on Ark 21Shares Bitcoin ETF, inviting public input on fraud safeguards and market manipulation concerns.
Key Points
- SEC delays decision on Ark 21Shares Bitcoin ETF for BZX listing.
- SEC seeks public input on ETF application, focusing on fraud safeguards and Bitcoin market manipulation concerns.
- Previous ETF applicants’ attempts to use CME Bitcoin Futures market for market monitoring not convincing to SEC.
- Decision delays also affect other Bitcoin spot ETFs; final Ark ETF decision due by January 10, potential ripple effect on market approval.
The Securities and Exchange Commission (SEC) has announced a delay in its decision on whether to approve or deny the Ark 21Shares Bitcoin ETF for listing on BZX. This delay may indicate a similar fate for other Bitcoin spot ETF applicants.
JUST IN: SEC has decided to delay decision on the ARK spot bitcoin ETF filing, as expected.. h/t @CoinDesk pic.twitter.com/HGZruPh2HT
— Eric Balchunas (@EricBalchunas) August 11, 2023
Seeking Public Input
In a letter released on Friday, the SEC requested public comment on BZX’s application to list the first Bitcoin spot ETF on a U.S.-regulated exchange. The agency clarified that the initiation of proceedings does not indicate any conclusion on the matter.
The SEC is particularly interested in receiving public opinions on two main issues. Firstly, whether the proposed ETF would be safeguarded against fraudulent and manipulative acts and practices.
Secondly, whether the Bitcoin market is prone to manipulation and if trading on the CME (CME Bitcoin Futures market) is a requirement for manipulating the market.
Concerns about Market Monitoring
Previous ETF applicants have attempted to establish surveillance-sharing agreements with the CME Bitcoin Futures market to meet the SEC’s market monitoring requirements.
However, the SEC has not been convinced that this market is sufficient for monitoring purposes, as evident from their response to applications from ARK and Grayscale.
The agency’s second question seeks public opinion on whether the CME, where CME Bitcoin Futures trade, is a sufficiently regulated market in terms of size related to spot bitcoin, and if any attempts to manipulate the Bitcoin market would necessarily involve trading on the CME.
Importance of Surveillance Sharing
The SEC’s final question focuses on Coinbase, the largest spot Bitcoin exchange in the United States.
ARK and several other applicants have named Coinbase as their preferred surveillance sharing partner.
The SEC aims to determine whether an agreement with Coinbase would aid in detecting, investigating, and deterring fraud and manipulation in Commodity-Based Trust Shares.
Next Deadlines and Potential Approval
Following the SEC’s delay of the Ark ETF decision, other Bitcoin spot ETFs face similar approval deadlines in early September. It is important to note that these decisions can also be delayed.
The final deadline for the SEC to make a decision on the Ark ETF is January 10. If approved, Cathie Wood, CEO of ARK Invest, expects that other competing firms’ ETFs will likely be approved simultaneously.
Meanwhile, Grayscale anticipates a ruling in its lawsuit against the SEC by the end of September. Analysts at Bloomberg predict that the outcome of this lawsuit remains the most likely path to spot ETF approval.
