WASHINGTON (Reuters) – Nasdaq’s bid to launch a bitcoin exchange-traded-fund (ETF) in partnership with BlackRock may face hurdles rather than advantages due to its association with Coinbase Global, according to industry experts.
Last month, Nasdaq submitted a proposal to the U.S. Securities and Exchange Commission (SEC) for a BlackRock ETF that would track the spot bitcoin market. This triggered a series of similar filings by competitors, including Cboe Global Markets, Fidelity, and Invesco.
The industry has high hopes for the approval of a bitcoin ETF, especially after a decade of rejections from the SEC. BlackRock’s involvement, as the world’s largest asset manager, has revived optimism for a potential breakthrough in securing approval. Since the filing was announced, bitcoin’s value has increased by more than 20%.
In an interview with FOX Business, BlackRock CEO Larry Fink highlighted the potential of the ETF to simplify crypto investments for everyday individuals. However, the SEC has previously rejected spot bitcoin ETF proposals over concerns about market manipulation.
To address this concern, Nasdaq announced a collaboration with Coinbase, the largest U.S.-based crypto exchange, to monitor trading activities in the underlying bitcoin market. The CBOE has also proposed a similar surveillance arrangement.
However, legal experts have expressed reservations about this partnership. Last month, the SEC filed a lawsuit against Coinbase, alleging that the platform traded cryptocurrencies qualifying as securities without proper registration and compliance with SEC rules for risk management and investor protection.
John Reed Stark, former chief of the SEC’s Office of Internet Enforcement, cautioned against relying on a company that is currently being sued by the SEC for critical investor protection services. Concerns have been raised over Coinbase’s transparency as an exchange.
Despite these concerns, Coinbase has emphasized its commitment to complying with disclosure rules as a listed company. Additionally, with 56% of U.S. dollar bitcoin trading relying on Coinbase, the platform plays a significant role in the U.S. bitcoin market.
Sui Chung, CEO of CF Benchmarks, a UK-regulated index provider for multiple proposed bitcoin ETFs, including BlackRock’s, highlighted the industry’s dedication to ensuring market integrity and transparency as per the SEC’s requirements.
Representatives for BlackRock, Nasdaq, and CBOE declined to comment on the matter. When asked about the partnership, SEC Chair Gary Gensler reiterated his previous remarks about the different levels of integrity and fairness between crypto exchanges and traditional equity markets.
Joseph Silvia, a lawyer with Dickinson Wright, clarified that the ETF proposals are separate from the Coinbase litigation, which falls outside the SEC’s jurisdiction. However, Gensler will ultimately decide whether the litigation will influence the ETF approval process.
Gensler has been critical of the entire crypto industry, citing widespread fraud. He accuses companies like Coinbase of purposefully flouting SEC rules. Many crypto firms argue against the SEC’s jurisdiction and claim that the regulations lack clarity.
The SEC has up to 240 days from accepting bitcoin ETF filings to make a decision. Chung believes that the industry will not invest resources in meeting the SEC’s requirements if the decision solely relies on the skepticism of a few individuals regarding bitcoin’s legitimacy as an investment asset.
However, some lawyers are not optimistic about a favorable outcome. Richard Marshall, a partner at law firm Katten and a former SEC attorney, believes that Gensler’s statements indicate limited flexibility from the SEC in approving bitcoin ETFs.
(Reporting by Michelle Price and John McCrank; additional reporting by Hannah Lang; Editing by Will Dunham)
Credit: The Star : Tech Feed
