The U.S. Securities and Exchange Commission extended its review of the Ark 21Shares bitcoin exchange-traded fund application, as it continues to look at applications from traditional finance heavyweights such as BlackRock (BLK) and Fidelity Investments.
The SEC published an order calling for public input on the Ark 21Shares Bitcoin ETF application, a standard move that pushes any decision by another several weeks. The SEC has a total of 240 days to make a final decision on an application after it starts reviewing one. The SEC is giving the general public three weeks to weigh in on the proposal itself, and an additional five weeks to respond to those initial slate of comments.
“In sum, the Exchange believes that this proposal is consistent with the requirements of Section 6(b)(5) of the Act, that this filing sufficiently demonstrates that the CME Bitcoin Futures market represents a regulated market of significant size, and that on the whole the manipulation concerns previously articulated by the Commission are sufficiently mitigated to the point that they are outweighed by investor protection issues that would be resolved by approving this proposal,” the filing said. .
Ark Investment Management and 21Shares, which have been seeking an ETF approval since 2021, filed for their first potential bitcoin ETF applications again earlier this year after a second effort was rebuffed by the SEC. The SEC has rejected spot bitcoin ETF products on grounds of potential market manipulation and inadequate investor protections against harmful activity.
If an ETF is approved, it would give a broader swath of the general investing public access to trading and holding bitcoin’s value without having to hold the digital asset itself.
Cathie Wood, Ark Invest’s CEO, told Bloomberg on Monday that she expected a delay in a decision on her firm’s application, but that the SEC will ultimately approve several applications simultaneously.
“Because most of these essentially will be the same, it will come down to marketing, communicating, the message” to see how they do, she said. “We’re trying to get the word out there that our research is deep, and we’ve been doing it since 2015.”
However, Scott Farnin, the legal counsel at consumer advocacy group Better Markets, said in a statement ahead of the SEC’s decision that the regulator should reject the bitcoin ETF applications outright, saying the surveillance-sharing agreements set up in proposals were “wholly inadequate.”
“The spot bitcoin markets (1) have a history of artificially inflated trading volumes due to rampant manipulation and wash trading; (2) are highly concentrated; and (3) rely on a select group of individuals and entities to maintain bitcoin’s network,” Farnin said. “These are features of the bitcoin network that make a proposed spot bitcoin-based ETP extremely vulnerable to manipulation by bad actors, posing unnecessary risks to investors and the public interest. The proposed rule changes offer little to neutralize these threats.”
Bitcoin (BTC) popped about $100 on the news but quickly came back to about $29,500.
UPDATE (Aug. 11, 2023, 14:50 UTC): Adds additional detail.