Cathie Wood’s investment firm ARK and cryptocurrency firm 21Shares are augmenting their efforts to get approval to create a spot Bitcoin ETF in the United States.
Wood’s ARK Invest and European crypto-investment firm 21Shares appear unfazed by the U.S. cryptocurrency regulatory environment and have re-applied for approval of a Bitcoin-based financial product
On April 25, the two companies applied to the U.S. Securities and Exchange Commission (SEC) for approval to set up a spot Bitcoin exchange-traded fund (ETF), despite having been rejected on two previous occasions.
The two companies first applied to create their spot Bitcoin ETF on June 28, 2021, which was subsequently rejected by the SEC in April 2022. The regulator said the product did not meet the listing requirements for a financial product under its rules of practice, as well as those of the Exchange Act.
The two filed another application for a second time in May 2022, an application that the SEC again rejected on Jan. 26 of this year.
It is important to point out that ETFs (exchange-traded funds) are pooled investment vehicles similar to mutual funds. They aim to replicate an underlying index, for example, the S&P 500.
An ETF allows investors to gain exposure to a particular asset without actually owning the underlying financial product. A spot Bitcoin ETF allows investors to gain indirect exposure to the cryptocurrency with shares that track the price of BTC in real time without actually owning Bitcoin.
This tool could lead Bitcoin to a market capitalization never seen before. But it could also impact the price of Bitcoin negatively, as it would allow many new speculators access to determine its price.
For example, a Bitcoin ETF would track the price of Bitcoin, and by buying a portion of that vehicle, you would be gaining if the price of Bitcoin goes up, or losing if the price of Bitcoin goes down. But you would not have bought bitcoins as such at any time.
Although the SEC has approved several Bitcoin futures ETFs – which expose buyers to BTC’s possible future value – it has so far rejected all spot Bitcoin ETF applications citing difficulties in “protecting investors and the public interest” against fraud and manipulation.
According to Bloomberg ETF analysts, it seems likely that a spot Bitcoin ETF could become a reality in the U.S. by the middle of this year. A new note on why we think spot bitcoin ETFs will be approved in early summer 2023. The SEC is proposing to expand the definition of “exchange” which would bring crypto platforms under SEC reg. After that (which could take a year) look for ETFs to get the green light via @JSeyff
Cryptocurrency conglomerate Digital Currency Group (DCG) is currently looking to convert its flagship Grayscale Bitcoin Investment Trust (GBTC) into a spot Bitcoin ETF and has sued the SEC for rejecting its proposal.
Grayscale’s chief legal officer Craig Salm said in a tweet on Jan. 12: “The case is progressing rapidly. Although the timeline is uncertain, oral arguments may be as soon as Q2 [2023].”
By Marina Meza
