ARK Invest has updated its proposal for a spot Bitcoin ETF via an amendment filed with the U.S. Securities and Exchange Commission (SEC) on October 11.
Bloomberg ETF analyst Eric Balchunas noted on X (formerly Twitter) that the update adds commentary on Coinbase’s custody practices. In particular, the filing notes that assets for the fund are held at segregated addresses on the Bitcoin blockchain, and that ETF assets are not commingled with corporate or client assets.
The SEC previously criticized Bitcoin ETF filings for insufficient oversight sharing agreements. To address the SEC’s concerns, several filings included an agreement with Coinbase through amendments filed in July.
The updated filing also notes that certain valuation methods used by the fund are not in accordance with generally accepted accounting principles (GAAP) in the US.
Filing also covers mining and illegal transactions
Scott Johnsson, General Partner and General Counsel at Van Buren Capital, noted separately that the updated submission includes comments on illegal activities. The filing indicates that if cryptocurrency is increasingly used in illegal transactions, or is perceived to be used in such transactions, the ETF’s value could decline.
Johnsson also identified a part of the application that concerns Bitcoin mining and electricity consumption. The updated filing acknowledges that the environmental impacts of mining, government regulations, changing energy prices and mining company closures could affect the price of Bitcoin and reduce the value of the proposed fund.
Balchunas noted that the update may be in response to a lawsuit the SEC initiated weeks ago. On September 29, the securities regulator asked for comments on proposals from BlackRock (iShares), Valkyrie and Invesco Galaxy and for more detailed comments on a proposal from BitWise. Although ARK Invest was not the subject of a request at the time, the update appears to address some of the SEC’s concerns.
To date, the SEC has not approved a spot Bitcoin ETF. However, the agency has approved Bitcoin futures ETFs in 2021 and approved Ethereum futures ETFs in recent weeks.
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