Coinbase Selected as Surveillance Partner for Fidelity and Other Bitcoin ETFs, Refiled Applications Reveal.
When refiled its spot bitcoin exchange-traded (ETF) fund applications, Cboe’s BZX Exchange revealed that it had chosen Coinbase as the market for its surveillance-sharing agreement. This decision was made on Friday and applies to multiple potential bitcoin ETF issuers.
In recent weeks, Fidelity, WisdomTree, VanEck, ARK Invest, Galaxy/Invesco, and BlackRock have all submitted filings for spot bitcoin ETFs, aiming to achieve success in launching a product that the U.S. Securities and Exchange Commission (SEC) has previously denied for several years. While BlackRock filed its application with Nasdaq, the remaining companies are collaborating with Cboe.
According to the Wall Street Journal, on Friday, the SEC informed both Nasdaq and Cboe that their applications were deemed “inadequate” as they did not specify the market with which the fund sponsors have established surveillance-sharing agreements.
In the refiled applications, Cboe stated that Coinbase’s platform is a significant contributor to U.S.-based and USD-denominated Bitcoin trading. As a result, Cboe named the U.S. cryptocurrency exchange as its partner for the surveillance-sharing agreements.
According to the filing, the Spot BTC SSA (surveillance-sharing agreement) is anticipated to possess the characteristics of an agreement between two members of the ISG (Intermarket Surveillance Group).
This agreement would grant the Exchange additional access to data concerning spot Bitcoin trades executed on Coinbase, should the Exchange deem it necessary for its surveillance program pertaining to the Commodity-Based Trust Shares. The arrangement is expected to resemble the information-sharing practices among exchanges within the ISG.
In previous instances, the SEC has emphasized the requirement for surveillance-sharing agreements with markets of “significant size.” The SEC argues that such agreements are crucial to safeguard consumers, prevent market manipulation, and discourage undesirable activities. The absence of these agreements has been a significant factor leading to the SEC’s rejection of several bitcoin ETF applications in the past.
The regulator has yet to officially confirm that it is reviewing the applications. Once the filings are published in the Federal Register, the SEC will commence an initial 45-day review period. However, the SEC has the authority to extend this review period to a maximum of 240 days.
The SEC’s decision-making process could become more complex due to its recent lawsuit against Coinbase. The lawsuit accuses Coinbase of operating an unregistered securities exchange, broker, and clearinghouse. It is important to note that the SEC is not asserting that Bitcoin itself is a security, and SEC Chair Gary Gensler has frequently cited Bitcoin as an example of a digital asset that does not fall under the category of a security.
There is uncertainty regarding whether the SEC will recognize Coinbase as a substantial and regulated market for Bitcoin. The determination of Coinbase’s status in this regard is yet to be determined by the SEC.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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