Can Coinbase’s Inclusion in Bitcoin ETF Applications Pose a Challenge?

• Last month, Nasdaq submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to launch the BlackRock ETF.
• Companies applying for ETFs are turning to Coinbase for custody services. According to some attorneys following the industry, this could potentially be a problem.
• According to one attorney, Gensler stated that Bitcoin is a crypto token that does not fall under the SEC’s jurisdiction and is not subject to the Coinbase case.

The U.S. Securities and Exchange Commission filed a lawsuit against Coinbase exchange in June. Following this lawsuit, Coinbase was added as a partner to Bitcoin ETF applications. Will this move make ETF approvals more difficult?

Bitcoin ETF Applications Spark Excitement in Crypto

Last month, Nasdaq submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to launch the BlackRock ETF. This ETF, which will track the spot Bitcoin market, prompted rivals such as Fidelity and Invesco to apply for similar Bitcoin ETFs on the Cboe Global Markets.

The proposal from BlackRock, the world’s largest asset manager, revived hopes that the SEC might finally approve a Bitcoin ETF and could be a turning point for this digital asset.

BlackRock CEO Larry Fink stated that an ETF could make it easier for an average person to invest in cryptocurrencies. Since the proposal was made public, the value of Bitcoin has increased by over 20%.

The SEC has previously rejected proposals for spot Bitcoin ETFs citing concerns about potential manipulation. Last week, Nasdaq announced plans to address this concern by partnering with Coinbase to regulate transactions in the underlying Bitcoin market. This week, CBOE also proposed a similar surveillance system.

Coinbase’s involvement poses a challenge for BTC ETF possibilities Companies applying for ETFs are turning to Coinbase for custody services. According to some attorneys following the industry, this could potentially be a problem. The SEC filed a lawsuit against Coinbase last month, and SEC Chairman Gary Gensler has increased his tough stance on the crypto industry.

According to the SEC, Coinbase should be registered as a broker, exchange, and clearing agency and should be subject to SEC risk management and investor protection regulations because it deals with cryptocurrencies that are considered securities. Despite Coinbase’s denial of the SEC’s allegations, its suitability as a partner for Nasdaq and CBOE is being questioned.

John Reed Stark, former head of the SEC’s Internet Enforcement Office, stated, “It’s not a badge of honor to say a company that the SEC sued is providing you with critical investor protection services. The reason the SEC sues is that there is no transparency about what Coinbase is doing.”

As a publicly traded company, the crypto exchange has previously stated that its operations are subject to various disclosure requirements. According to Nasdaq’s application, the exchange accounts for approximately 56% of Bitcoin transactions conducted in U.S. dollars.

Will the partnership with Coinbase work?

According to one attorney, Gensler stated that Bitcoin is a crypto token that does not fall under the SEC’s jurisdiction and is not subject to the Coinbase case. Therefore, ETF proposals are separate issues that are unrelated to the Coinbase case and should be treated separately.

Gensler also mentioned that the crypto industry is fighting against fraud and companies like Coinbase made a “calculated business decision” to ignore SEC regulations. Many crypto companies are challenging authorities, claiming that the SEC’s jurisdiction and rules are uncertain.

If Bitcoin ETF applications are approved, the SEC has a total of 240 days to make a decision. Some attorneys argue that despite BlackRock’s application, the SEC and Gensler will not change their stance on BTC ETFs. One attorney stated, “Gensler’s comments don’t give me the impression that he will be flexible… I don’t think the SEC will open its doors.”