The U.S. Securities and Exchange Commission (SEC) has rejected a second attempt by Ark Investment Management and 21Shares to list a spot bitcoin exchange-traded fund (ETF) on the Cboe BZX Exchange. The SEC stated that the exchange had failed to demonstrate that its proposal was consistent with the requirements surrounding the prevention of fraud and other malignant practices. This marks another setback in the ongoing effort to approve a spot bitcoin ETF in the United States.
An ETF is a type of investment fund that tracks the performance of a specific market or sector. A spot bitcoin ETF would track the price of bitcoin by holding actual bitcoin as its underlying assets. It would provide a more convenient and accessible way for investors to gain exposure to the price movements of bitcoin, without the need for managing their own digital wallets or storage. However, the SEC has raised concerns about the lack of regulation and potential for fraud in the cryptocurrency market as reasons for rejecting applications for spot bitcoin ETFs.
Despite the SEC’s decision, firms such as Grayscale Investments have decided to take legal action against the decision. They argue that the ETF is a way to help the crypto markets become more regulated and mainstream, and that the SEC’s decision is not based on the merits of the proposal.
A spot bitcoin ETF would provide several benefits to investors and the cryptocurrency market as a whole. These benefits include:
- Accessibility: A spot bitcoin ETF would provide a more convenient and accessible way for investors to gain exposure to the price movements of bitcoin, without the need for managing their own digital wallets or storage.
- Liquidity: ETFs are traded on major stock exchanges, which would provide a more liquid market for bitcoin trading.
- Transparency: ETFs are required to disclose their holdings on a regular basis, which would provide transparency for investors.
- Diversification: A spot bitcoin ETF would provide investors with the opportunity to diversify their portfolio by adding exposure to the cryptocurrency market.
- Regulation: The approval of a spot bitcoin ETF could signal greater regulatory oversight of the cryptocurrency market, which could help to increase investor confidence and attract more institutional investors to the market.
The SEC’s rejection of a spot bitcoin ETF proposed by Ark Investment Management and 21Shares is yet another setback in the ongoing effort to approve a spot bitcoin ETF in the United States.
