Addresses accounting methods, risk assessment techniques, and surveillance-sharing arrangements.
On October 11, ARK Invest submitted an amendment to the United States Securities and Exchange Commission (SEC), updating its spot Bitcoin ETF proposal. Bloomberg ETF analyst Eric Balchunas noted on X (formerly known as Twitter) that the update added commentary on Coinbase’s custody practices. The application clarifies that the fund’s assets are held on separate addresses on the Bitcoin blockchain and are not commingled with company or client assets.
The SEC had previously criticized spot Bitcoin ETF applications due to insufficient surveillance-sharing agreements.
Application Also Addresses Mining and Illegal Activities
Scott Johnsson, General Partner and General Counsel at Van Buren Capital, further noted that the updated application includes comments related to illegal activities. The application indicates that if cryptocurrency is increasingly used or perceived to be used in illegal transactions, the value of the ETF could decline.
Johnsson also identified a section in the application dealing with Bitcoin mining and electricity consumption. The updated application acknowledges that environmental consequences from mining, government regulations, fluctuating energy prices, and closures of mining companies could adversely affect Bitcoin’s price and the proposed fund’s value.
Balchunas suggested that the update could be a response to a process initiated by the SEC a few weeks earlier. On September 29, the regulator had requested more comprehensive comments about proposals from BlackRock (iShares), Valkyrie, and Invesco Galaxy, and about a proposal from BitWise. ARK Invest was not the subject of a request at that time, but its update appears to address some of the SEC’s concerns.
To date, the SEC has not approved a spot Bitcoin ETF. However, the agency did approve Bitcoin futures ETFs in 2021 and Ethereum futures ETFs in recent weeks.