In what seems to be a significant step forward, ARK Invest/ 21Shares has submitted an updated version of its spot Bitcoin Exchange-Traded Fund (ETF) prospectus. This move follows after the SEC reached out to issuers a few weeks prior with comments and questions about their S-1 filings.

Why A Spot Bitcoin ETF Draws Closer

Bloomberg’s senior ETF analyst, Eric Balchunas, elucidated on Twitter: “ARK has just filed an updated version of its spot Bitcoin ETF prospectus. The SEC emailed issuers a few weeks ago with comments/questions about their S-1 that they wanted addressed so it is very possible ARK has answered all that in this filing. We are looking thru it now.”

He further added, “Ok here’s one change, under NAV calcs (which is something we heard the SEC commented on) the new prospectus has stuff on how the NAV calc is NOT in accordance with GAAP accounting.”

Notably, Net Asset Value (NAV) calculations and the safeguarding of assets have been pivotal points in the discourse between spot ETF aspirants and the SEC. The updated prospectus deviates from Generally Accepted Accounting Principles (GAAP) in NAV calculations and stipulates particulars regarding the segregation of assets: “The Trust’s assets with the Custodian are held in segregated accounts on the Bitcoin blockchain, commonly referred to as ‘wallets,’ and are therefore not commingled with corporate or other customer assets.”

The amendments exhibit responsiveness to SEC’s inquiries, reflecting a conscientious back-and-forth which Balchunas acknowledged is “hugely positive,” albeit not necessarily signaling “imminent approval.”

However, this dialogue between Ark and the SEC is undeniably crucial in aligning the Bitcoin spot ETF with the regulatory parameters set forth by the SEC. James Seyffart, a Bloomberg analyst, similarly noted, “Adding details stating that the ETF’s Bitcoin will be held on an individual wallet and not commingled. This all signals to us that Ark/21Shares & likely others are talking with the SEC about things they want cleared up in these docs. Good sign for future approval IMO.”

Scott Johnsson, a finance lawyer at Davis Polk, gave his take on these changes, “Just skimmed changed pages on this. If these are actually responsive to SEC comments, it doesn’t look like the agency is putting up any unnecessary roadblocks via disclosure review. At least currently and based on this amendment.”

Balchunas responded in agreement, emphasizing the ease with which ARK made the required changes. He noted that none of the SEC’s comments seemed overly new or challenging. He remarked, “Agree w/ Scott (who is a lawyer on this stuff btw). I also heard separately that none of the comments were that new or insurmountable, which is prob why ARK was able to address it all in two weeks flat. On lookout now for the rest of the pack to file their updates.”

Will Ark Be Approved First?

In a nuanced perspective, Nate Geraci, President of the ETF Store, presented a contemplation on the precedence of approval among multiple applicants: “If we assume Grayscale’s original 19b-4 isn’t a ‘live’ filing (they believe it is), then ARK was first to file in latest wave of spot Bitcoin ETFs. They’re now first to amend filing in response to recent SEC comments. Why shouldn’t they be first to launch?”

The aforementioned point raised a significant debate after the Grayscale ruling. There was a general consensus among Bloomberg’s ETF analysts that the SEC might approve all Bitcoin ETF applications simultaneously, negating any first-mover advantage for any single entity. A collective approval might foster a competitive environment among various ETFs from Ark Invest / 21 Shares, BlackRock, Fidelity, Invesco, and Bitwise.

In the realm of digital asset funds, Alistair Milne, Chief Investment Officer of the Altana Digital Currency Fund, juxtaposed the regulatory advancements with the prevailing market situation:

ARK updates its ETF filing with minor edits and details, certainly following feedback from the SEC as it properly engages for the first time. The US Bitcoin ETFs are coming and BTC is below $30k. Unreal.

At press time, BTC had not reacted to the news and was trading at $26,864.