The SEC has continued to take a cautious stance on approving spot Bitcoin ETFs. Some actors are hopeful that regulated cryptocurrency custody providers can pave the way for ETF approval.
Among asset managers around the world, anticipation has reached a fever pitch for the Bitcoin ETF’s approval. While the potential for these ETFs to generate significant capital and investments in the cryptocurrency industry, including Bitcoin, is notable, there are concerns that analysts may have overlooked.
BitGo CEO Mike Belshe has expressed reservations about the likelihood of the US Securities and Exchange Commission (SEC) approving Bitcoin spot ETF applications due to the integration of Coinbase as an exchange and custodian. Belshe maintains that the risks associated with Coinbase’s multifaceted role have not been fully understood, which could lead to further rejections before positive news emerges.
Could Bitcoin ETFs Face More Rejections?
In a recent interview with Bloomberg, Belshe shared his thoughts on the state of Bitcoin ETF applications and their challenges. While expressing optimism and acknowledging positive conversations between applicants and the SEC, Belshe believes another round of rejections may be necessary to address concerns about market structure.
Belshe cites SEC Chairman Gary Gensler’s emphasis on separating exchanges from custody, drawing parallels with the functioning of the stock market. Belshe also alludes to Coinbase’s role as an exchange, custodian and broker-dealer, highlighting risks within the entity that may not be fully understood.
Belshe’s concerns arise from Coinbase’s integration of multiple features within its platform. While clarifying that Coinbase is not on the same level as bankrupt crypto exchange FTX and its co-founder Sam Bankman-Fried, Belshe says they are employing a “similar playbook.”
Coinbase presents risks that the crypto community may not fully understand by operating as an exchange, custodian, and broker-dealer simultaneously. Belshe suggests that the SEC could require a complete separation of these functions before approving the Bitcoin ETF.
Although JPMorgan analysts stated in an investment note on October 17 that approval could come in the coming months, the general consensus – held by Bloomberg ETF analysts James Seyffart and Eric Balchunas – puts the approval at 90%. possibilities of approval before January 10 of next year.
BitGo CEO Advocates Custodian Role in Bitcoin ETF
While highlighting the challenges of integrating Coinbase, Belshe emphasizes that there are viable solutions available. He points to custodians like BitGo, which specialize in custody services without engaging in exchange or trading activities.
By using custodians like BitGo, the industry can address the need for separation between exchanges and custody, which could pave the way for SEC approval of Bitcoin spot ETFs, Belshe said.
Belshe’s comments reflect broader concerns in the crypto industry about the regulatory landscape and the need for clearer guidelines and structures to gain regulatory approval for innovative financial products like Bitcoin ETFs.
While some regulated cryptocurrency custody providers like Anchorage, BitGo, and Coinbase are independent of cryptocurrency exchanges, debate continues over whether this separation is enough for the SEC to approve a Bitcoin ETF.
Overall, as enthusiasm for Bitcoin spot ETFs continues to grow, BitGo CEO Mike Belshe has expressed concerns about Coinbase integrating as an exchange and custodian. Belshe believes the SEC may reject Bitcoin ETF applications until Coinbase’s functions are completely separated.
As the industry anxiously awaits regulatory decisions, the debate surrounding Coinbase’s role in Bitcoin spot ETFs adds a layer of complexity to the ongoing discussions.
By Audy Castaneda