When resubmitting its spot bitcoin exchange-traded (ETF) fund applications for a number of prospective bitcoin ETF issuers on Friday, Cboe’s BZX Exchange identified cryptocurrency exchange Coinbase as the market for its surveillance-sharing agreement.In recent weeks, Fidelity, WisdomTree, VanEck, ARK Invest, Galaxy/Invesco, and BlackRock have submitted applications for spot bitcoin ETFs in an effort to establish a product that the U.S. Securities and Exchange Commission (SEC) has consistently denied.The other businesses are collaborating with Cboe, while BlackRock registered with Nasdaq.
According to the Wall Street Journal, the SEC informed Nasdaq and Cboe on Friday that their applications were “inadequate” because they failed to identify the market that the fund sponsors are collaborating with on their surveillance-sharing arrangements.In its resubmitted applications, Cboe identified Coinbase as its partner for these surveillance-sharing arrangements, noting that the Coinbase platform “represents a substantial portion of U.S.-based and USD denominated Bitcoin trading.”
“The Spot BTC SSA [surveillance-sharing agreement] is expected to have the hallmarks of a surveillance-sharing agreement between two members of the ISG, which would give the Exchange supplemental access to data regarding spot Bitcoin trades occurring on Coinbase if the Exchange determines it is necessary as part of its surveillance program for the Commodity-Based Trust Shares in a manner similar to the way that exchanges share information as part of ISG,” the filing said.
In the past, the SEC has urged markets of “significant size” to enter into surveillance-sharing arrangements, claiming that doing so is vital to stop market manipulation and other undesirable practices while also safeguarding customers. Many of the earlier bitcoin ETF application rejections by the SEC were largely caused by the absence of these agreements.The regulator must nevertheless declare in writing that it is considering the applications.When it publishes the filings in the Federal Register, the country’s logbook, the SEC will begin a 45-day initial review phase; but, it may extend this to a total of 240 days.
While the SEC is not claiming that Bitcoin is a security and SEC Chair Gary Gensler has frequently cited it as an example of a digital asset that is not a security, the fact that it sued Coinbase earlier this month on claims of operating an unregistered securities exchange, broker, and clearinghouse may complicate the SEC’s calculations.
It’s also uncertain if the SEC will accept Coinbase as a large, regulated bitcoin market.