BTC ETF Application Update: Positive Progress and Clarity
In a recent development, a modification has been made to the joint spot Bitcoin ETF application by ARK Invest and 21Shares. This adjustment has resulted in a decrease of $26,809 in the BTC ticker value. This alteration is now being seen as a positive indicator of forward progress and potential approvals in the pipeline.
The revised filing, which was submitted on October 11 to the United States Securities and Exchange Commission, provides additional insights into the proposed spot Bitcoin ETF. It delves into various aspects, including the methods employed for asset custody and the processes for determining asset values.
In the eyes of Eric Balchunas, a senior ETF analyst at Bloomberg, these changes likely reflect a response to concerns raised by the SEC. Balchunas suggests that ARK has diligently addressed the SEC's comments, and the ball is now in the SEC's court. This is being interpreted as a positive step forward in the approval process, signaling substantial progress.
This is also new (and again something we heard SEC asked about): "The Trust’s assets with the Custodian are held in segregated accounts on the bitcoin blockchain, commonly referred to as “wallets,” and are therefore not commingled with corporate or other customer assets." pic.twitter.com/57TmnNi1lE— Eric Balchunas (@EricBalchunas) October 11, 2023
It's worth noting that these adjustments are dispersed throughout the document, which has extended the filing by an additional five pages. However, it's reassuring to learn that none of the comments introduced were overly groundbreaking or impossible to overcome.
One noteworthy modification is ARK's acknowledgment that the net asset value (NAV) calculations of the fund do not adhere to Generally Accepted Accounting Principles (GAAP), a standard recognized by the SEC.
Furthermore, the updated filing provides clarity regarding the ETF's assets, which are held by Coinbase Custody in segregated accounts, ensuring that they are kept entirely separate from corporate or other customer assets.
Ok here's one change, under NAV calcs (which is something we heard the SEC commented on) the new prospectus has stuff on how the NAV calc is NOT in accordance with GAAP accounting. Good eye by @JSeyff pic.twitter.com/jdINXQjKrd— Eric Balchunas (@EricBalchunas) October 11, 2023
James Seyffart, another ETF analyst at Bloomberg, suggests that this clarification signifies ongoing communication between ARK and the SEC, instilling optimism for future approval.
Scott Johnsson, a general partner at Van Buren Capital, also highlighted an additional aspect in the updated filing. It discusses a potential scenario in which the value of the ETF could decrease if Bitcoin were increasingly used for illicit purposes or if the environmental impact of Bitcoin mining led to regulatory restrictions.
Still chuckling a bit at this “electricity usage” risk factor. Ark couldn’t even be bothered to put in a coherent header summary or more than a couple short sentences. You know the convo w/ the SEC was like “oh yea, good call Mr. SEC attorney, this is definitely material /s” https://t.co/unIArFDKl8— Scott Johnsson (@SGJohnsson) October 12, 2023
In conclusion, these amendments by ARK seem to indicate a cooperative and responsive approach, suggesting that the SEC is not unnecessarily impeding the approval process with undue regulatory obstacles.