ARK Invest updates spot Bitcoin ETF proposal in response to SEC criticisms
The filing addresses accounting methods, risk valuation techniques, and surveillance-sharing arrangements.
Bloomberg ETF analyst Eric Balchunas noted on X (formerly Twitter) that the update adds comments on Coinbase’s custodial practices. Specifically, the application notes that assets for the fund are held in segregated addresses on the Bitcoin blockchain, and that ETF assets are not commingled with corporate assets or customer assets.
The SEC previously criticized spot Bitcoin ETF applications for insufficient surveillance-sharing agreements.To address the SEC’s concern, several applications incorporated an agreement with Coinbase through amendments submitted in July.
The updated application also notes that certain valuation methods that the fund uses are not in line with U.S. generally accepted accounting principles (GAAP).
Filing also addresses mining, illicit transactions
Scott Johnsson, General Partner and General Counsel at Van Buren Capital, separately noted that the updated filing includes comments concerning illicit activity. The filing indicates that, if cryptocurrency is increasingly used in illegal transactions, or if it is perceived as being used in such transactions, the value of the ETF could fall.
Johnsson also identified a section of the filing that concerns Bitcoin mining and electricity consumption. The updated filing acknowledges that environmental consequences from mining, government regulations, changing energy prices, and mining firm closures could affect the price of Bitcoin and decrease the value of the proposed fund.
Balchunas noted that the update may be a response to a process that the SEC initiated weeks ago. On Sept. 29, the securities regulator requested comments on proposals from BlackRock (iShares), Valkyrie, and Invesco Galaxy and requested more extensive comments on a proposal from BitWise. Though ARK Invest was not the subject of a request at that time, its update seems to address some of the SEC’s concerns.
To date, the SEC has not approved a spot Bitcoin ETF. However, the agency approved Bitcoin futures ETFs in 2021 and approved Ethereum futures ETFs in recent weeks.