Here’s a long story short – the SEC went after Coinbase and Binance.US in June, and all hell broke loose in the crypto ecosystem. Soon after that, market behemoth BlackRock filed for Bitcoin ETF and named Coinbase as their security service provider. And for a while, all seemed to work out best for the American crypto exchange.
However, recent market analysis shows that Coinbase could be the very weapon formed against BTC ETFs that is causing them not to prosper – to approvals. According to a report by Reuters, partnering with Coinbase Global may hinder rather than help Nasdaq’s efforts to gain regulatory approval for a Bitcoin exchange-traded fund (ETF) it plans to launch with BlackRock.
Bitcoin ETF filings cause a stir in the crypto community
Last month, Nasdaq submitted to the U.S. Securities and Exchange Commission (SEC) a proposal to launch a BlackRock ETF. The ETF would track the spot bitcoin market, prompting competitors, including Fidelity and Invesco, to file for comparable bitcoin ETFs on Cboe Global Markets.
The proposal from BlackRock, the world’s largest asset manager, revived industry hopes that the SEC might eventually be swayed to approve a bitcoin ETF, which would be a watershed moment for the digital asset.
Larry Fink, CEO of BlackRock, stated in an interview with FOX Business last week that the ETF could make it simpler for the average person to invest in cryptocurrencies. Bitcoin has risen by over 20% since the filing was made public.
The SEC has rejected previous proposals for spot bitcoin ETFs on the grounds that they would be susceptible to manipulation. Last week, Nasdaq announced that it would address this concern by collaborating with Coinbase, the largest crypto exchange in the United States, to regulate trading in the underlying bitcoin market. This week, the CBOE proposed a similar surveillance system.
Coinbase’s involvement poses a challenge to BTC ETF prospects
Entities filing for ETFs have turned to the crypto exchange for surveillance services. According to some lawyers who follow the industry, this could potentially be a problem. The SEC sued Coinbase last month, intensifying SEC chairman Gary Gensler’s crackdown on the crypto industry.
According to the SEC, Coinbase should be registered as a broker, exchange, and clearinghouse and subject to the SEC’s risk management and investor protection regulations. This is because it trades cryptocurrencies that qualify as securities.
In light of Coinbase’s denial of the SEC’s allegations, its suitability as a partner for Nasdaq and CBOE is questioned.
I don’t think it’s necessarily a badge of honor to say that you’re using an entity that the SEC is suing as providing you with critical investor protection services […] The whole point of the SEC’s lawsuit is that there’s no transparency into what Coinbase does.
John Reed Stark, former chief of the SEC’s Office of Internet Enforcement
As a publicly traded company, the crypto exchange has previously stated that its business is subject to numerous disclosure regulations. According to Nasdaq’s filing, the exchange is essential to the U.S. bitcoin market, as it accounts for approximately 56% of U.S. dollar bitcoin trading.
Will the partnership work?
According to one attorney, Gensler has stated that bitcoin is a crypto token that falls outside the SEC’s jurisdiction and that the crypto is not subject to the Coinbase litigation. Therefore the ETF proposals are unrelated to the Coinbase litigation and should be treated separately.
In addition, Gensler has stated that the crypto industry is plagued with fraud and that companies such as Coinbase made a “calculated economic decision” to disregard SEC regulations. The majority of crypto companies contest the SEC’s authority and argue that the rules are ambiguous.
Upon acceptance of the filing applications for the Bitcoin ETF, the SEC has a total of 240 days to make a decision.
Some lawyers foretell that the SEC and Gensler will not waive their stand on BTC ETFs regardless of the BlackRock filing. One lawyer asserts that “the statements that Gensler has made don’t give me any sense that he’s going to be flexible […] I don’t see that the SEC is going to open the gates.”
