21Shares and Ark Invest Again Try for Spot Bitcoin ETF — But Why Now?

The refiling of a spot bitcoin ETF application this week could signal the start of a new queue ahead of an anticipated court ruling, industry watchers said — though other prospective issuers might not be so quick to follow suit.

21Shares, an arm of Switzerland-based 21.co, teamed up with disruptive innovation-focused money manager Ark Invest in 2021 to launch a bitcoin fund. The SEC denied the companies’ proposed ETF in March 2022 and blocked a second attempt from the companies in January.

The two companies re-upped their bid for such an offering, according to a Tuesday filing. 

While the current regulatory environment in the US signals a spot bitcoin ETF “won’t happen overnight,” a spokesperson told Blockworks, the company remains committed to trying to launch such a product. 

The latest proposal reinforces how a regulated ETF of this type —  available via standard brokerage accounts — helps protect investors against insolvency, cyber attacks and other risks.

“American investors have been hurt by crypto scams that are primarily international — and especially because there aren’t available, easy, regulated options at home,” the representative added.

Why did they refile now?

Dave Nadig, a financial futurist for data firm VettaFi, said the 171-page filing is “an absolute treasure trove of real research” related to how bitcoin and futures contracts tied to the asset interact.

“Nobody can claim they and the other notable filers haven’t done the work,” he told Blockworks.

It could be part of what Nadig called a “getting in line process” for issuers ahead of a decision in Grayscale’s lawsuit against the SEC. The crypto asset manager sued the US securities regulator last year after it blocked the conversion of the Grayscale Bitcoin Trust (GBTC) to an ETF.  

“The gamble is that the SEC loses the court case from Grayscale, and thus has to approve spot bitcoin ETFs,” Nadig explained. “I have long suspected that even if they do, it will take Grayscale longer to get through the final conversion process than it would for a clean filing to be approved. And that’s what this is — a clean filing.”

Sumit Roy, a senior analyst at ETF.com, agreed 21Shares and Ark could simply be trying to get ahead of a potential favorable ruling for Grayscale. 

Grayscale CEO Michael Sonnenshein said during a Wednesday interview on Bloomberg Television that a decision in the firm’s case against the SEC could come by the third quarter. 

Some have speculated, Roy added, that a proposal by the SEC to expand the definition of an exchange could bring crypto trading platforms under its oversight and open the door to spot bitcoin ETF approval. 

“I think it has more to do with these things than a change in the filing per se,” he told Blockworks.   

Will others re-file? And when? 

While Roy said it’s possible more issuers could look to re-file soon, he noted many remain down on the prospects for a spot bitcoin ETF due to the SEC’s hostility against the crypto industry more generally. 

“I don’t expect a surge of new filings until there are more positive signals that an approval could be possible,” Roy said.  

Nadig said he expects all issuers who have previously sought to launch a bitcoin ETF to refile closer to the Grayscale-SEC case decision. 

Valkyrie Investments, which had its spot bitcoin ETF application denied in December 2021, does not appear to be in a rush to do so. 

Chief Investment Officer Steven McClurg told Blockworks in an email that the firm believes bitcoin miners are “a suitable investment thesis” for ETF investors wanting exposure to the bitcoin ecosystem.

The firm launched the Valkyrie Bitcoin Miners ETF (WGMI) in February 2022 — a few months after bringing to market a fund that invests in bitcoin futures contracts. 

“Valkyrie does not take action based on other firms’ activities,” McClurg added. “We think and act independently based on what we see in the market.”

Other fund issuers, such as Bitwise Investments, Global X and VanEck, did not immediately return requests for comment. 

Bitwise Chief Investment Officer Matt Hougan told Blockworks earlier this month that his firm would likely wait for more regulatory clarity before trying again to launch a spot bitcoin ETF.

“Long term, we think a spot bitcoin ETF would be a wonderful thing for investors, a wonderful thing for the crypto market,” he said at the time.

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