ARK Invest's Response: Updating the Bitcoin ETF Proposal Amid SEC Criticisms

Bombolo | News and Media

In a recent development, ARK Invest has submitted an updated proposal for a spot Bitcoin ETF to the U.S. Securities and Exchange Commission (SEC) on October 11. This move has garnered significant attention, and in this article, we will delve into the details of this proposal, the changes it brings, and the potential implications.

The world of cryptocurrency investment has eagerly awaited the approval of a Bitcoin ETF. ARK Invest's recent amendment to its proposal is a notable step in this direction. However, this update carries more weight than meets the eye.

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ARK Invest's Updated Proposal

ARK Invest's proposal introduces several critical updates. One of the key aspects is its alignment with Coinbase's custodial practices. The application highlights that fund assets are securely held in segregated addresses on the Bitcoin blockchain, ensuring that ETF assets are entirely separate from corporate or customer assets.

Coinbase's Custodial Practices

This addition is particularly significant, given the SEC's previous concerns about surveillance-sharing agreements. By incorporating Coinbase, ARK Invest aims to address these concerns and provide greater transparency in the management of ETF assets.

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Addressing SEC's Concerns

The SEC has been critical of previous spot Bitcoin ETF applications, primarily due to concerns about surveillance-sharing agreements. Several applications, including ARK Invest's, amended their proposals in July to incorporate agreements with Coinbase to address these concerns. This shows a proactive approach by ARK Invest to align with regulatory requirements.

Valuation Methods and Accounting Principles

The updated application also draws attention to certain valuation methods not in line with U.S. generally accepted accounting principles (GAAP). While this may seem like a minor detail, it underscores ARK Invest's commitment to transparency and compliance with accounting standards.

Dealing with Illicit Activity

Scott Johnsson, General Partner and General Counsel at Van Buren Capital, highlights another crucial aspect of the updated filing - comments concerning illicit activity. The proposal addresses concerns that the use of cryptocurrency in illegal transactions could adversely impact the ETF's value.

Concerns about Bitcoin Mining

Additionally, the proposal acknowledges concerns related to Bitcoin mining and electricity consumption. Environmental consequences, government regulations, changing energy prices, and mining firm closures could all affect Bitcoin's price and, in turn, the value of the proposed fund.

Possible SEC Response

Bloomberg ETF analyst Eric Balchunas suggested that this update might be in response to the SEC's recent initiatives. In late September, the SEC requested comments on various Bitcoin ETF proposals. While ARK Invest wasn't part of this initial request, its update appears to align with the SEC's concerns.

In conclusion, ARK Invest's updated proposal for a spot Bitcoin ETF is a significant step toward regulatory approval. By addressing concerns related to custody, valuation methods, illicit activity, and environmental impact, ARK Invest demonstrates its commitment to meeting the SEC's requirements.

Also Read: SEC's Active Engagement Signals Strong Chance of Year-End Approval for Spot Bitcoin ETFs

. FAQs

FAQ 1: What is the significance of ARK Invest's updated proposal for a Bitcoin ETF?

ARK Invest's updated proposal for a Bitcoin ETF is significant because it addresses key concerns raised by the SEC, such as custody, valuation methods, and potential illicit activity.

FAQ 2: How does Coinbase play a role in this update?

Coinbase's custodial practices are now incorporated into ARK Invest's proposal, ensuring that ETF assets are held separately from corporate or customer assets, enhancing transparency.

FAQ 3: What are the concerns about valuation methods?

The updated proposal mentions that certain valuation methods used may not align with U.S. generally accepted accounting principles (GAAP), highlighting ARK Invest's commitment to compliance.

FAQ 4: How does the proposal address illicit activity?

The proposal acknowledges the potential impact of cryptocurrency use in illegal transactions on the ETF's value, indicating ARK Invest's risk awareness.

FAQ 5: What are the environmental concerns related to Bitcoin mining?

The proposal recognizes the environmental consequences of Bitcoin mining, including government regulations, changing energy prices, and mining firm closures, which could affect the proposed fund's value.