SEC Seeks Fresh Comments on ARK Invest & 21Shares Bitcoin ETF: Are Applications at Risk of Rejection?

In a recent move, the U.S. Securities and Exchange Commission (SEC) has widened the arena for stakeholder engagement on pivotal crypto matters. Today, the SEC has invited the public to provide “written data, views, and arguments” regarding the proposed spot bitcoin application put forward by ARK Invest and 21Shares.

SEC Diving Deep Into A Suite Of Bitcoin ETF Submissions

The U.S. Securities and Exchange Commission (SEC) has prolonged its assessment of the Ark 21Shares Bitcoin ETF proposal, while concurrently examining submissions from financial giants such as BlackRock and Fidelity.

Today, the Securities and Exchange Commission called for fresh written feedback regarding the spot bitcoin proposal put forth by ARK Invest and 21Shares, a move many had anticipated. Stakeholders are encouraged to provide “written data, views, and arguments” within the next 21 days. Earlier in the month, ARK’s CEO, Cathie Wood, had mentioned her anticipation of such a delay.

Wood said, “I think you’re probably right that Aug. 13 will come and go. I think the SEC, if it’s going to approve a bitcoin ETF, will approve more than one at once.”

The regulatory body is presently assessing applications for a minimum of eight distinct funds. They recognized the recent influx from prominent asset managers like BlackRock, Fidelity, VanEck, and Invesco in the previous month. The ARK 21Shares Bitcoin ETF was at the first, while the public commentary phase for the other submissions has recently concluded.

Since 2021, Ark Investment Management and 21Shares have pursued ETF approval. After their second attempt was turned down by the SEC, they once again filed for a potential bitcoin ETF application earlier this year.

Historically, the SEC has dismissed spot bitcoin ETF proposals, citing concerns over potential market manipulation and insufficient safeguards for consumers against malicious activities.

SEC May Reject Applications

If an ETF receives approval, it would grant a wider segment of the general investment populace the ability to trade and retain the value of bitcoin without directly possessing the digital asset.

The potential of a spot fund sparked bullish rally, leading to a surge in bitcoin’s price, which soared roughly 20% following BlackRock’s submission. However, SEC Chair Gary Gensler has voiced apprehensions regarding deceit and malfeasance in the industry.

Prior to the SEC’s decision, Scott Farnin, the legal advisor at consumer advocacy group Better Markets, expressed in a statement that the regulator should outright decline the bitcoin ETF applications. He asserted that the surveillance-sharing arrangements presented in the proposals were “entirely insufficient.”

Farnin highlighted concerns about the spot bitcoin markets, pointing out their history of potentially manipulated trading volumes and a high concentration. He also mentioned the network’s reliance on a select group to maintain it.

Farnin believes these factors make a proposed spot bitcoin-based ETP highly susceptible to manipulation, posing significant risks to investors. He also expressed doubts about the proposed rule changes adequately addressing these vulnerabilities.