SEC Postpones Decision on Ark Invest’s Spot Bitcoin ETF Application and Seeks Public Feedback

The US Securities and Exchange Commission (SEC) has recently announced a delay in its decision on Ark Invest’s spot bitcoin exchange-traded fund (ETF) application. The SEC has extended the timeline by calling for a period of public comment before making this crucial decision.

As part of this process, the SEC has issued an order inviting the public to provide their feedback on Ark Invest’s Ark 21Shares Bitcoin ETF application, which is a common approach that allows the agency to buy more time.

Ark Invest, along with 21Shares, has been actively seeking the approval of a spot Bitcoin ETF since last year.

While the delay may come as no surprise, Ark Invest CEO Cathie Wood had anticipated it. In an interview with Bloomberg, Wood expressed her belief that the SEC will simultaneously approve multiple spot Bitcoin ETF applications, leading to the delay.

Earlier this year, several major Wall Street players, including BlackRock, Fidelity, and Vanguard, filed spot Bitcoin ETF applications for the first time. The SEC’s initial deadline to respond to these filings is scheduled for early September.

The Inevitability of Approval

Previously, the SEC had rejected all spot Bitcoin ETF applications due to concerns regarding investor protection and the potential manipulation of the underlying spot market. This rejection was primarily based on the lack of regulation in most major spot cryptocurrency exchanges in the US.

Grayscale, which has long been advocating for the SEC’s approval to convert their Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF, is currently suing the agency over repeated denials.

However, the recent wave of new applications from BlackRock and other prominent firms includes additional market information and surveillance-sharing agreements. These measures are designed to enhance the detection and prevention of potential manipulation in the spot market.

As a result, many experts believe that this new wave of spot Bitcoin ETF applications has a high likelihood of approval. Companies like BlackRock rarely apply for a spot Bitcoin ETF unless they have confidence in securing approval.

In fact, Galaxy Digital CEO Mike Novogratz mentioned in an earnings call that his sources at institutions like BlackRock view the approval of these applications as a matter of “when, not if.” His sources predict that approvals could be granted within four to six months.

Thus, it seems unlikely that a batch of spot Bitcoin ETF applications will receive approval in September. Instead, the final deadline for a decision on these filings is expected to be in March 2024, which appears to be a more realistic timeframe.

How Will Spot Bitcoin ETF Approvals Impact the Market?

If spot Bitcoin ETFs are approved in the US, it is expected to pave the way for institutional funds to enter the Bitcoin market. Up until now, many fund managers have been hesitant to allocate a portion of their portfolios to Bitcoin due to the absence of a regulated spot ETF product.

Approval of spot Bitcoin ETF applications can potentially generate a significant increase in demand for the cryptocurrency. This influx of institutionally managed funds could create a major bullish narrative in 2024.

In addition to the impact of spot Bitcoin ETF approvals, other bullish factors such as the upcoming Bitcoin halving, potential monetary policy changes from the US Federal Reserve, and broader adoption of cryptocurrencies (facilitated by initiatives like PayPal’s stablecoin and fiat-to-crypto on-ramps) are also expected to contribute to a positive market sentiment.