Grayscale Says Coinbase Won’t Work As Bitcoin ETF Surveillance Partner
According to the company, the SEC shouldn’t allow any Bitcoin spot ETF associated with Coinbase without also approving Grayscale and other applicants.
In order to avoid “picking winners and losers,” Grayscale requested in a letter to the Securities and Exchange Commission (SEC) of the United States that all eligible Bitcoin spot ETF applications be approved simultaneously.
The company countered that, in accordance with the SEC’s pre-established guidelines, Coinbase shouldn’t be allowed to offer such a product as a surveillance partner.
Why Coinbase Is Insufficient?
According to the comment letter, the SEC has long questioned the pricing information provided by ‘unregulated’ Bitcoin trading sites.
Grayscale referred to the SEC’s outright rejection of GraniteShares ETP Trust’s intention to join Gemini’s exchange in a surveillance-sharing arrangement (SSA) in 2018. Gemini was found by the SEC to not be a regulated market equivalent to a national securities exchange.
The company also cited the SEC’s rejection of Grayscale’s ETF application from the previous year as evidence that the agency would not consider market data obtained from a number of spot Bitcoin exchanges, including Coinbase. The SEC decided that BitLicense regulation and NYSDFS and FinCEN oversight had no bearing on whether the group was qualified for an SSA.
“We believe the Commission’s prior decisions have already determined that such an agreement with a venue lacking compulsory investigative authority and oversight by a comprehensive market, regulator does not satisfy Section 6(b)(5) in the absence of a surveillance sharing agreement with a market of significant size,” wrote Grayscale.
When asked if it was disputing the usefulness of information obtained under a surveillance-sharing agreement with a spot bitcoin trading venue, Grayscale stressed that it was not.
Conflict at Grayscale’s Court
A number of asset managers, including BlackRock, filed with the SEC to start a spot Bitcoin ETF beginning in late June. Later on, many of those companies identified Coinbase as their ideal partner for an SSA to guard against market manipulation, an aspect of each application that no applicant has yet been able to successfully submit to the SEC.
Grayscale is directly taking the SEC to court in an effort to turn its Bitcoin fund into an ETF, unlike its friendlier rivals. The business maintains its stance that CME Bitcoin Futures reflect a market with enough volume in relation to the Bitcoin spot market to qualify as an SSA.
Grayscale suggested that if the SEC were to alter its mind and authorise a Coinbase-affiliated ETF, it should at the very least put investors first, particularly those of its GBTC fund.
“The Commission would be required to afford the listing exchange for the Trust (and all other spot bitcoin ETPs whose Rule 19b-4 filings were previously disapproved) the opportunity to amend their Rule 19b-4 filings, so that all of these spot bitcoin ETP proposals can be approved simultaneously,” the company stated.
