Coinbase to Partner with Fidelity and Other Bitcoin ETFs for Surveillance – Here’s the Latest

Last week, a Wall Street Journal (WSJ) report unveiled the dissatisfaction of SEC insiders with the recent batch of spot bitcoin ETF applications from prominent financial institutions like Blackrock, Wisdomtree, Valkyrie, Fidelity, Ark Investment, and Invesco. 

Following this revelation, four of the firms mentioned, namely Fidelity, Vaneck, Invesco, and Wisdomtree took action and resubmitted their filings.

WSJ contributor Vicky Ge Huang, citing “people familiar with the matter,” disclosed that the regulatory body found the ETF registrations inadequate, notifying Cboe and Nasdaq about this development.

Responding to the SEC’s feedback, Cboe, an exchange operator, confirmed its intention to resubmit its spot bitcoin ETF filings. 

Staying true to their word, Cboe collaborated with global crypto exchange Coinbase to prevent potential market manipulation and made the necessary updates and amendments to the filings submitted initially by Fidelity, Vaneck, Invesco, and Wisdomtree.

On Friday, Cboe officially refilled its application with the U.S. securities regulator to launch a bitcoin exchange-traded fund managed by Fidelity, addressing the SEC’s concerns and clarifying any previous ambiguity or incompleteness in their filing. 

The goal is to ensure a smooth and compliant process for the ETF launch while preventing market manipulation.

Coinbase Officially Designated as Surveillance-Sharing Partner; Blackrock and Ark Opt Out

A significant update occurred on Friday when Coinbase officially designated a surveillance-sharing agreement (SSA) partner. 

It is worth mentioning that although Blackrock and Ark did not refile their applications, Blackrock had previously indicated Coinbase as its chosen SSA partner.

In its amended applications, Cboe emphasized that Coinbase’s platform plays a significant role in U.S.-based and USD-denominated Bitcoin trading. 

According to information from Cboe’s Fidelity bitcoin ETF filing, Coinbase’s platform accounted for approximately half of U.S. dollar-bitcoin trading in May.

“The Spot BTC SSA [surveillance-sharing agreement] is expected to encompass the essential characteristics of a surveillance-sharing agreement between two members of the ISG. This would grant the Exchange supplementary access to data about spot Bitcoin trades occurring on Coinbase. The Exchange will utilize this data as part of its surveillance program for the Commodity-Based Trust Shares, similar to how exchanges exchange information within the ISG,” stated the filing.

SEC Pushes for Surveillance-Sharing Agreements, Bitcoin ETFs Denied

The SEC has advocated establishing surveillance-sharing agreements with significant markets, stating that such deals prevent market manipulation and safeguard consumers. This lack of cooperation has substantially influenced the SEC’s rejection of various Bitcoin ETF applications.

“The marketplace is not only not transparent and not audited but it’s also, according to the SEC, rife with manipulation,” said John Reed Stark, a former chief of the SEC’s Office of Internet Enforcement said of the cryptocurrency market.

Regarding the current situation, the SEC has yet to acknowledge its application review formally. 

Once the filings are published in the Federal Register, which serves as the national logbook, a 45-day initial review period will commence. However, this period can be extended up to 240 days.

When approached for comments on these matters, the SEC, Cboe, Nasdaq, Fidelity, and BlackRock declined to provide statements, while Coinbase was unavailable for immediate comment.

Recently filed bitcoin ETF applications by BlackRock and Fidelity have contributed to a significant surge in bitcoin prices, rising more than 20% since June 15 to reach one-year highs.

The cryptocurrency market faced challenges earlier in the year due to several crypto company collapses, such as the sudden shutdown of exchange FTX in late 2022, which negatively impacted investor sentiment. 

Despite the SEC’s request for additional information on bitcoin ETF filings, the price of bitcoin has remained resilient, indicating that sentiment has not turned bearish.