The highly anticipated approval of a Bitcoin spot ETF in the United States faces a new obstacle as SEC Chairman Gary Gensler raises concerns about Coinbase’s surveillance sharing agreement (SSA) in the approval process.
During a recent webinar, Gensler was questioned about Coinbase’s involvement in the ETF filings. While he refrained from commenting directly on the filings, his remarks on crypto exchanges and their “conflicting services” and “limited risk monitoring” were far from reassuring. Gensler highlighted the potential for crypto exchanges to trade against investors and act as market makers, which is not seen on traditional exchanges like the New York Stock Exchange or NASDAQ.
The implications of Gensler’s comments are significant, especially in light of the recent enforcement action taken by the SEC against Coinbase for operating as an unregistered exchange, broker, and clearing agency. This raises doubts about the suitability of Coinbase as a market surveillance sharing partner for firms seeking approval for the first Bitcoin spot ETF, including industry giants BlackRock and Fidelity.
Eric Balchunas, a Senior ETF analyst for Bloomberg, reacted to Gensler’s statements, suggesting that the SSA could be rendered pointless if it is seen as a problem by the SEC. Balchunas speculated that behind-the-scenes efforts by BlackRock to address these concerns might be underway, with the SEC potentially leveraging ETF approval as an opportunity to address the issues highlighted by Gensler.
However, not everyone shares this optimistic viewpoint. Industry observer Bias Knox expressed skepticism, suggesting that Gensler’s motivations might be more politically driven than based on merits. Knox remarked that Gensler is a regulator masquerading as a politician who does not care about the merits.
The setback introduced by Gensler’s comments adds further uncertainty to the already challenging path to approval. James Seyffart, a research analyst for Bloomberg Intelligence, noted that Gensler’s remarks may be laying the groundwork for potential denial reasoning, leading to further uncertainty and goalpost shifting.
The ongoing debate surrounding Bitcoin spot ETF approval continues to keep analysts and enthusiasts on edge. Balchunas, who previously placed the odds of approval at 50/50, indicated that discussions are underway to reassess these probabilities, awaiting technical details from the Federal registry that will likely influence the revised odds.
While the SEC’s stance remains uncertain, Gensler’s broader concerns regarding conflicting services and limited risk monitoring offered by crypto exchanges cannot be ignored. The SEC has consistently rejected spot Bitcoin ETF applications due to concerns over transparency and potential market manipulation.
Coinbase and the SEC are scheduled to meet in court today for a pre-motion hearing, adding further intrigue to the unfolding situation.
At the time of writing, the price of BTC stood at $30,332.