In recent news, concern has been brewing about the U.S. Securities and Exchange Commission (SEC) dissatisfaction with the current state of spot bitcoin exchange-traded funds (ETF) applications; they lack sufficient clarity and depth. According to the filings, the SSA (surveillance-sharing agreements), supposed to demonstrate issuers’ aptitude at detecting bitcoin market fraud and manipulation, are vague. More significantly, the exchange responsible for enforcing these SSAs is missing.
Interestingly, the SSA addition is perceived as essential to get a bitcoin ETF approved in the U.S., taking into account potential impacts such as facilitating greater institutional adoption of cryptocurrency. Coinbase, the choice of surveillance overseer proposed by many of the applicants, comes with its pros and cons.
Coinbase, being a publicly traded company, does bring with it a more credible image compared to other crypto exchanges. However, questions float regarding its suitability for the role. For context, the SEC rejected numerous attempts from bitcoin ETF issuers, citing the lack of an SSA-like agreement among the reasons.
The SEC expects an information sharing agreement between the ETF-listed stock exchange and a substantial and regulated spot bitcoin exchange. Coinbase fits the bill, but it is not the largest spot bitcoin exchange, accounting for roughly 2.5% of the worldwide daily trading volume.
Looking closer, however, the issue might not lie here, but rather in the SEC’s understanding of Coinbase being “regulated”. Understandably, they could have reservations given they’re currently in court with Coinbase. While the matter at hand doesn’t concern the bitcoin market, it’s a point to be considered.
Sadly, the concept of a “regulated market” and “significant size” is not absolutely defined, making Coinbase’s fit for this role blurry. Questions arise whether Coinbase is indeed adequate as a data provider partner or not.
One plausible solution currently flirting with the discourse is the implementation of an information-sharing agreement. This deal may grant regulators the power to request specific information about an end client’s trading history, possibly including personal data like their name and address, thereby superseding the surveillance provider’s mere assurance of all being fine.
Such an arrangement, while alarmingly invasive to some, maybe the inevitable result of introducing a spot bitcoin ETF to the market or any substantial financialization of crypto. Are we ready for a highly regulated bitcoin product, and do we realise what comes with it – regulation in its most intrusive form? Only time will tell.
Source: Coindesk
