Earlier on Friday, the Securities and Exchange Commission (SEC) instructed Cboe to disclose the name of its partner. The partnership aims to address regulatory concerns and enhance transparency in the growing market of digital assets. The refiled applications submitted by the Bitcoin ETF providers highlight the pivotal role that Coinbase will play in ensuring the integrity of these investment products, where Coinbase will be Fidelity’s surveillance partner for ETF.
They revealed that Coinbase, a cryptocurrency exchange, has been named as the market for its surveillance-sharing agreement. This announcement comes as Fidelity, WisdomTree, VanEck, ARK Invest, Galaxy/Invesco, and BlackRock have also filed for spot bitcoin ETFs in recent weeks, aiming to successfully launch products that the U.S. Securities and Exchange Commission (SEC) has previously rejected. While BlackRock filed its application with Nasdaq, the other companies are collaborating with Cboe.
SEC Deems Nasdaq and Cboe Applications “Inadequate” Due to Lack of Surveillance-Sharing Agreement Disclosure
According to the Wall Street Journal, on Friday, the Securities and Exchange Commission (SEC) informed both Nasdaq and Cboe that their applications were deemed “inadequate” as they failed to disclose the market with which the fund sponsors are collaborating on their surveillance-sharing agreements.
As part of its refiled applications, Cboe stated that Coinbase’s platform plays a significant role in U.S.-based and USD-denominated Bitcoin trading. Therefore, Cboe named Coinbase, the U.S. cryptocurrency exchange, as its partner for the surveillance-sharing agreements.
According to the filing, the surveillance-sharing agreement (SSA) for Spot BTC is anticipated to possess the key features of an agreement between two members of the ISG (Intermarket Surveillance Group). This agreement of Coinbase will be fidelity’s surveillance partner for ET and would grant the Exchange additional access to data on spot Bitcoin trades taking place on Coinbase if deemed necessary for the surveillance program of the Commodity-Based Trust Shares. The arrangement aims to facilitate information sharing akin to how exchanges participate in the ISG.
SEC Highlights Importance of Surveillance-Sharing Agreements for Bitcoin ETF Approval
In previous instances, the SEC has emphasized the need for surveillance-sharing agreements with markets of considerable magnitude, citing the importance of safeguarding consumers and preventing market manipulation or undesirable activities. The absence of such agreements has played a significant role in the SEC’s previous denials of Bitcoin ETF applications.
The regulator has yet to officially acknowledge the receipt and review of the applications. Once the filings are published in the Federal Register, which serves as the national logbook, the SEC will commence an initial 45-day review period. However, the SEC has the authority to extend this period up to a maximum of 240 days.
The SEC’s decision-making process may face challenges due to recent events, including the SEC’s lawsuit against Coinbase earlier this month. The lawsuit alleges that Coinbase operated as an unregistered securities exchange, broker, and clearinghouse. However, it’s important to note that the SEC does not claim that Bitcoin itself is a security, and SEC Chair Gary Gensler has frequently highlighted Bitcoin as an example of a digital asset that is not classified as a security. Additionally, it is yet to be determined whether the SEC will recognize Coinbase as a significant and regulated market for Bitcoin.
In conclusion, Coinbase will be fidelity’s surveillance partner for ETF and other Bitcoin ETF providers as a surveillance partner marks a significant step toward regulatory compliance and transparency in the cryptocurrency market. By leveraging Coinbase’s expertise in surveillance and compliance, these ETFs aim to address market manipulation and illicit activities concerns. The involvement of established financial institutions like Fidelity Investments lends credibility to the cryptocurrency industry and paves the way for wider institutional adoption. However, the SEC’s scrutiny, ongoing regulatory developments, and the recognition of Coinbase as a significant market for Bitcoin remain important factors that will shape the future of Bitcoin ETFs and the overall digital asset landscape.