Expectedly, the Securities and Exchange Commission (SEC) delayed the Ark 21Shares Bitcoin ETF. ARK Investment Management and 21 Shares applied on May 15, 2023, with the set evaluation deadline of August 13, 2023. The SEC will now seek further comments on their proposal, which has a 35-day period.

The first time, on June 28, 2021, Wood’s ARK Invest was providing marketing while 21Shares filed for the actual Bitcoin ETF application. The SEC rejected it in April 2022. Before ARK Investment Management and 21Shares tried their luck with the SEC, Fidelity and CBOE Global Markets filed for their own Bitcoin ETFs in March 2021 with an equal lack of results.

Earlier in the week on Bloomberg TV, Cathie Wood expected this outcome, as the SEC will most likely approve multiple Bitcoin ETFs simultaneously. However, it is not set in stone if the watchdog agency will approve a single ETF or multiple.

In the former scenario, this would give the fund a first-mover advantage and allow the SEC to monitor and assess the risks. This data would then determine if more Bitcoin ETF applicants should be approved.

Why Has the SEC Rejected Spot Bitcoin ETFs?

So far, only futures-traded Bitcoin ETFs have been approved in the US. A spot-traded one would track the price of Bitcoin, providing the crypto king with the same mainstream exposure as public companies have on stock exchanges.

The underlying assumption is that this ease of access would not only boost Bitcoin’s credibility but open the investor floodgates. Typically, those investors want Bitcoin exposure without actually owning it in their non-custodial wallets.

In contrast, as derivatives-based, futures-traded Bitcoin ETF doesn’t result in ‘physical’ Bitcoin being traded, relying on futures contracts instead. Therefore, they do not erect buy or sell walls that could influence Bitcoin’s price directly.

The SEC has employed a two-step approach that states that Bitcoin doesn’t have a “regulated market of significant size” for a spot-traded Bitcoin ETF to be approved. This means the market would first have to be more regulated, in line with traditional financial markets, such as capital and margin requirements.

This was the case with the latest delay for the Ark 21Shares Bitcoin ETF as well:

“the regulated market of significant size test does not require that the spot bitcoin market be regulated in order for the Commission to approve this proposal, and precedent makes clear that an underlying market for a spot commodity or currency being a regulated market would actually be an exception to the norm.”

How Many Bitcoin ETFs Are on the Waiting List?

Eight applicants are on the waiting list, including the re-filed ARK 21Shares Bitcoin ETF. Nearly all their final deadlines end in March 2024, just one month before Bitcoin’s 4th halving in April. If approved, then this date alignment is perceived to be exceedingly bullish.

Given BlackRock’s stature as the “fourth branch of the government” that the Federal Reserve hired to manage post-lockdown fallout, expectation prevails that the $9 trillion asset manager will receive the SEC’s blessing.

In that scenario, Coinbase (COIN) will be the primary beneficiary, as it previously partnered with BlackRock to onramp institutional investors using the proprietary Aladdin management system. Moreover, Coinbase has been listed among six applicants as the appropriate custodian to handle the ETFs’ surveillance.

This puts the SEC in an awkward position, having accused Coinbase of “operating as an unregistered securities exchange, broker, and clearing agency” in June. In July, COIN stocks rallied after reaching a surveillance-sharing agreement with Cboe’s BZX Exchange for five Bitcoin ETF applicants.

The SEC considers surveillance-sharing agreements (SSAs) critical for preventing market manipulation. This includes artificially deflating/inflating an asset to siphon profits, using insider information, placing large orders not meant to be filled to mislead the market, or spreading misinformation.

This article originally appeared on The Tokenist

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