ARK Invest updates spot Bitcoin ETF proposal in response to SEC criticisms

Addressing Illicit Activity and Environmental Concerns

ARK Invest submitted an amendment to the U.S. Securities and Exchange Commission (SEC) regarding its proposal for a spot Bitcoin exchange-traded fund (ETF). This amendment reflects additional information regarding Coinbase’s custodial practices. Specifically, the application highlights that the fund’s assets are held in segregated addresses on the Bitcoin blockchain and ensures that ETF assets are not combined with corporate or customer assets.

The SEC had previously expressed concerns about the lack of surveillance-sharing agreements in spot Bitcoin ETF applications. To address these concerns, several applications, including ARK Invest’s, introduced agreements with Coinbase in amendments submitted in July.

The updated application also acknowledges that certain valuation methods employed by the fund do not align with U.S. generally accepted accounting principles (GAAP).

Addressing Illicit Activity and Environmental Concerns

The amendment also includes comments about potential illicit activity involving cryptocurrencies. It suggests that if cryptocurrencies are increasingly associated with illegal transactions or perceived as being used for such purposes, the value of the ETF could decline.

Additionally, the filing addresses Bitcoin mining and its environmental impact. It recognizes that the environmental consequences of mining, changes in government regulations, fluctuations in energy prices, and closures of mining firms could affect Bitcoin’s price and potentially reduce the value of the proposed ETF.

The update appears to be a response to a process initiated by the SEC several weeks prior. On September 29, the SEC requested comments on proposals from BlackRock (iShares), Valkyrie, Invesco Galaxy, and BitWise. While ARK Invest was not initially subject to this request, the latest amendment seems to address some of the SEC’s concerns. It’s worth noting that the SEC has not yet approved a spot Bitcoin ETF, despite approving Bitcoin futures ETFs in 2021 and Ethereum futures ETFs in recent weeks.