In a latest move, Ark Invest and 21Shares have amended their spot Bitcoin ETF application for the third time. Amidst these developments, another wave of spot Bitcoin ETF rejections is coming, according to BitGo CEO Mike Belshe.
Ark Invest makes changes to Bitcoin ETF application
Bloomberg’s ETF expert Eric Balchunas explained Ark’s surprising move. He called it a positive step forward in the SEC permitting process. Some issues in the update attract the attention of both analysts and investors. One important aspect was the disclosure of a fee for the proposed ETF. Balchunas announced that ARKB will charge 80 basis points (bps). This marked Ark Invest as the first issuer to announce such a fee. This move is significant as it adds a layer of transparency to the investment product, in line with the growing demand for open and clear fee structures in the Bitcoin ETF space.
Going into the details of the change, Balchunas highlighted various updates, focusing on new risk disclosures. He suggested that these additions are likely to address specific concerns raised by the SEC’s Division of Corporate Finance (Corp Fin). Interestingly, the spot Bitcoin ETF filing maintains a reliance on in-kind creations and redemptions, albeit in a hybrid model. This decision is a strategic move to reduce tax impacts and address potential issues. In this context, Balchunas made the following statement:
Some say I must have ‘misheard’ that the SEC was advising issuers to generate cash. I heard correctly. However, some issuers will try to back down. They will also attempt to ‘sell’ the SEC in kind, given the obvious benefits for investors. We’ll see how this plays out.
BitGo CEO expects a wave of rejection!
Mike Belshe, CEO of crypto custodian BitGo, says the SEC will usher in another wave of spot Bitcoin ETF application rejections. Belshe argues that the duality of modern crypto firms like Coinbase will create problems. Because, Coinbase provides both services as a crypto exchange and custodian. Belshe says this will cause the regulator to reject BTC ETF applications. In this regard, Belshe makes the following statement:
We’re all excited about the ETF. It’s definitely getting closer. We’re certainly getting signals from applicants’ conversations with the SEC. BitGo is also working with some of these people, so I’m optimistic. But I think it’s quite likely that we’ll get another round of ETF rejections before we get positive news. This really comes back to market structure. Gary Gensler makes no secret that you need to separate exchanges from custody at this point. The CFTC market structure is already like this. So, you need to separate the exchanges from the oversight of the stock markets.
The SEC will demand their complete separation!
Mike Belshe notes that the SEC will likely require separation of these services before approving the applications. Belshe points out that many of these applications were made with the Coinbase custody service. Based on this, Belshe underlines the following points for spot Bitcoin ETF applications:
Coinbase, although I’m not trying to say they’re an FTX, they follow the same playbook. In addition to being an exchange and custodian, they recently received approval from an FCM (futures broker). So, they became a broker-dealer. What that means is that there are a lot of risks in this organization that are not fully understood, and I think the SEC could probably turn around and say, ‘No, you need to completely separate these before we move forward.’
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