SEC Delays ARK 21Shares ETF Application and Opens 21-Day Commentary Period

Unsurprisingly, the Securities and Exchange Commission (SEC) has delayed its approval/denial of the Ark 21Shares Spot Bitcoin ETF.  The application, which had an official deadline of August 13th, will now undergo a 21-day period in which the SEC accepts commentary on the proposal.  If it so chooses, the SEC can continue to delay such proposals for up to 240 days, putting the definitive deadline for this particular application in January 2024

Market Reaction

Days ago, ARK Invest CEO Cathie Wood indicated that she expected this delay to be the case.  Between this insight, and the scores of times digital asset investors have been through this before, the effect on the market was quite muted.  Essentially, a delay had already been priced in.

Bulk Approval?

Notably, there appears to be a growing belief that when an ETF is finally approved, it will not be for a single proposal.  Rather, many feel as though when the day comes, the SEC will opt for bulk approval.  This may be the case for multiple reasons,

• each active proposal is essentially a mirror image of the others, with each putting forth similar surveillance mechanisms
• to prevent any one company from attaining a first-movers market advantage

While the idea of preventing a first-movers advantage may sound ideal at first, it does also undermine the persistence put in by digital asset-focused companies over the years, only to finally be approved when TradFi decides to enter the fray.

Waiting on Grayscale?

Another factor that has no doubt influenced this decision by the SEC is the ongoing lawsuit involving Grayscale.  As the operator of the world's largest Bitcoin Trust, GBTC, Grayscale took the SEC to court last year as it felt full-heartedly that its proposal to convert GBTC to a spot-BTC ETF should be approved.  While its reasons for this belief are varied, much of its argument hinges on the fact that the SEC has already approved BTC futures ETF, which are in the eyes of many, riskier than a spot-ETF.

With this case expected to be resolved in Q4, this most recent denial may simply be a strategic punt down the field, as the SEC waits on a verdict before announcing its next move.

The Pressure is On

At the end of the day, the pressure is on the SEC.  The current, growing crop of Bitcoin ETF applications is no longer comprised of proposals from niche, digital asset-focused companies.  Rather, is it comprised of proposals from the world's largest asset managers.  If companies like Blackrock feel as though the market is mature enough to put its name behind such a product, and for its CEO to tout the benefits of BTC to the world, a denial becomes harder to justify.