Tag: ark 21shares

SEC Rejects Application for Physical Bitcoin ETF from Ark 21Shares

The United States Securities and Exchange Commission (SEC) has once again rejected a proposal for a physical Bitcoin exchange-traded fund (ETF) filed by Ark 21Shares which is run by Investment superstar Cathie Wood.

According to a filing last Thursday, SEC rejected an ARK 21Shares Bitcoin ETF application, citing a lack of investor protections.

The ARK Investment Management LLC, led by Cathie Wood, and 21Shares, a Europe-based exchange-traded product issuer, partnered and applied for the ARK 21Shares Bitcoin exchange-traded fund (ETF) on behalf of the Cboe BZX Exchange to change the rules and allow for the listing of the Ark 21Shares offering.

The SEC’s refusal of the proposal from the Chicago Board Options Exchange (Cboe BZX Exchange) to list and trade shares of the ARK 21Shares Bitcoin ETF.

The SEC stated that the proposed rule change would not be “designed to prevent fraudulent and manipulative acts and practices” nor “protect investors and the public interest.”

The SEC further highlighted that the Cboe BZX Exchange had not met the standards of listing a financial product under its rules of practice and those of the Exchange Act. Under such requirements, exchanges intending to list a Bitcoin ETF should have “a comprehensive surveillance-sharing agreement with a regulated market of significant size related to the underlying or reference Bitcoin assets,” the regulator explained.

Taking the Lead in Crypto Investments

In June 2021, Ark Investment Management and 21Shares submitted the application for the physical Bitcoin ETF for listing on the Cboe BZX Exchange under the ticker ARKB. In January 2022, the SEC extended the review for such applications to April.

One of the most vocal and longstanding Bitcoin bulls, Wood has been purchasing proxies for the digital asset in names like Coinbase and Grayscale Bitcoin Trust. But in June last year, the innovation investor announced plans to create her own Bitcoin Exchange-Traded Fund to cash in on investors” rising interest in cryptocurrencies.

Last year, Wood’s flagship product, ARK Innovation ETF, was the top-performing U.S. equity fund. The ARK Innovation fund owns about $820 million worth of shares in Coinbase crypto exchange, making it the fund’s 10th largest holding in the exchange. Besides Coinbase, her fund owns 8.986 million shares in Grayscale’s’ Bitcoin Trust and also holds stakes in Square payments company, which in turn owns a huge amount of Bitcoin on its balance sheet.

SEC Postpones Ethereum ETF Decision Amid Regulatory Scrutiny

The U.S. Securities and Exchange Commission (SEC) has once again extended the timeline for its decision regarding the spot Ethereum exchange-traded funds (ETFs) proposed by Hashdex and Ark 21Shares. The regulatory body has set a new deadline for May 2024, as it requires additional time to assess the implications and potential regulatory issues that could arise from the introduction of such products to the market.

This move marks another instance in the SEC’s cautious approach towards cryptocurrency ETFs. Despite the growing interest and investment in cryptocurrencies, the SEC has consistently delayed or denied applications for cryptocurrency ETFs, citing concerns over market manipulation, liquidity, and the protection of investors.

Analysts James Seyffart and Eric Balchunas have expressed skepticism regarding the approval of these ETFs, predicting further delays. According to their analysis, the regulatory landscape for crypto ETFs remains uncertain, and the SEC’s track record suggests a pattern of postponements. They anticipate at least three more delays for Ethereum ETFs within the coming 12 days, which reflects the SEC’s meticulous review process in the face of complex and evolving crypto markets.

The SEC’s decision to delay its verdict on Hashdex and Ark 21Shares’ applications underscores the challenges that digital asset management firms face in gaining regulatory approval for crypto-related investment products. The SEC has been under pressure to provide clearer guidance and establish a regulatory framework that would allow for the safe integration of such products into the U.S. financial system, while also ensuring investor protection.

The potential approval of an Ethereum ETF could have significant implications for the cryptocurrency industry. It would provide a regulated and more accessible means for investors to gain exposure to Ethereum without the need to directly purchase and hold the cryptocurrency. However, the SEC’s hesitancy suggests that the commission remains unconvinced that the current market infrastructure and surveillance mechanisms are adequate to address its concerns.

In the broader context, the SEC’s position on cryptocurrency ETFs is reflective of the agency’s broader approach to digital asset regulation. The SEC has taken a stance of scrutiny and enforcement, as seen in various actions taken against crypto companies and their executives for alleged violations of securities laws. This pattern of enforcement and cautious regulatory progress may continue to shape the landscape of crypto investments in the United States.

As the May 2024 deadline approaches, the crypto community and investment firms will be closely monitoring the SEC’s actions and statements for indications of a possible shift in its stance on crypto ETFs. Until then, the postponed decision remains a significant point of discussion and analysis within the financial and crypto sectors.

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