Ark 21Shares Bitcoin ETF Denied by the SEC for the Second time – Here’s Why
The USA Securities and Exchange Commission (SEC) refused to grant its regulatory approval to yet another. Ark Investment Management an exchange-traded note issuer 21Shares To list a spot Bitcoin (BTC), exchange-traded fund or ETF.
According The document was published January 26th. Cboe BZX Exchange On which ETFs would be listed and stated
“The Commission concludes BZX has [failed to] Demonstrate that your proposal is in line with Exchange Act Section 6 (b)(5). This requires that rules for a national securities exchange “be designed to prevent fraudulent or manipulative acts and practice” and “to protect investors”
The SEC stated that when deciding whether an exchange’s proposal to trade and list these shares was intended to prevent fraud and manipulation, it used the same analytical framework as before to determine if an exchange seeking to list an exchange traded product (ETP). This allowed the SEC to meet Section 6(b(5) of the Exchange Act.
A bitcoin-based ETP exchange can fulfill its obligations under the Act by demonstrating it has a comprehensive surveillance-sharing arrangement with a large regulated market related to the underlying or refer bitcoin assets.
The document stated that surveillance-sharing agreements aren’t the only way for an ETP to list on a commodity-trust ETP, but they can be used.
“Where, like here, a listing market fails to establish that additional means to prevent fraudulent or manipulative acts will suffice, the listing exchange should enter into a surveillance sharing agreement with a large regulated market because these agreements detect and deter manipulative and fraudulent activity.”
Further, the SEC states that BZX claims that its proposal is compatible with Section 6(b),(5) of Exchange Act because:
- The exchange has a comprehensive surveillance sharing agreement with a large regulated market.
- There are other ways to stop fraudulent and manipulative acts. These are enough to warrant displacing with the detection of fraud and manipulation provided through a comprehensive surveillance-sharing arrangement with a large regulated market related to spot bitcoin.
The Commission countered that BZX didn’t provide enough protection against fraudulent and manipulative acts or practices to allow the SEC to reconsider its position.
The BZX concluded that BZX had not established a comprehensive surveillance-sharing arrangement with a regulated marketplace of significant size in relation to spot bitcoin.
“BZX reiterates several assertions made by BZX in previous bitcoin-based ETP propositions, including the Previous ARK Filing – the Commission has previously addressed, and rejected, these assertions, as well as in the prior ARK 21Shares Order – and, more importantly, BZX doesn’t respond to many reasons that the Commission gives for rejecting those assertions.”
An application had been rejected by the SEC. Application Ark Invest and 21Shares, two investment products providers, filed the application, which was submitted by Cathie Wood, a well-known investor, in April 2022. The duo Filed Another application was submitted in May. Last year, the SEC extended the deadline for approval or disapproval of ARK 21Shares ETF multiple times.
21Shares also announced last year that it had partnered with an asset manager ByteTree Asset Management To launch an ETP that combines bitcoin and gold called the 21Shares ByteTree BOLD (BOLD), which is listed on the SIX Swiss Exchange.
According to Bloomberg, the crypto-focused ETF markets saw a significant uptake in 2023 due to a rise in cryptocurrency prices. The 14 best-performing ETFs, all of which were tied to digital assets (excluding leveraged products), were identified by Bloomberg in mid-January. Bloomberg noted that crypto funds dominated the $6.8 trillion ETF marketplace.
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