Grayscale defeated the U.S. Securities and Exchange Commission (SEC) in court on Tuesday, which is good news for cryptocurrencies and the market is in the green. But on Wall Street, Coinbase is also flying high, and there are ample indications why.
Coinbase shares were up 15% at market close on Tuesday. The gains outpaced bitcoin itself, which is up 7 percent in the past 24 hours, according to CoinGecko.
After the U.S. Court of Appeals for the D.C. Circuit sided with Grayscale, ordering the SEC to reconsider an application to convert its flagship bitcoin fund, the Grayscale Bitcoin Trust (GBTC), into a spot bitcoin ETF, calling the previous rejection “capricious.” Prices have gone up. ”
Grayscale said in July that the SEC should immediately approve all bitcoin ETFs when the time comes, saying U.S. financial regulators “shouldn’t be picking winners and losers.” Coinbase is uniquely positioned to see a lot of upside amid growing expectations that a spot bitcoin ETF could soon be approved, according to Paul Grewal, chief legal officer at Coinbase.
“Coinbase can play an important role as a preferred custodian to ensure the protection of customer assets,” he told Decrypt in a written statement. “Our commitment to entering into oversight-sharing agreements with listed exchanges reinforces our commitment to support and enhance their compliance efforts.”
Firms including $8.5 trillion asset manager BlackRock have appointed Coinbase as custodian for tokens in their spot bitcoin ETF. The product, which has not yet been approved in the U.S., will provide investors with indirect exposure to bitcoin without owning it themselves.
A spot bitcoin ETF needs to buy bitcoin and issue a corresponding number of shares. While BlackRock chose Coinbase as its future custodian, others, such as Valkyrie, have dropped the exchange in their amended filings.
The leading U.S. cryptocurrency exchange has also established so-called supervisory sharing agreements with Cboe BZX exchange and Nasdaq, several of which have applied to list their own spot bitcoin ETFs.
Under the agreement, Coinbase will enhance the ability of Cboe and Nasdaq to detect potential fraud and manipulation in the bitcoin spot market by providing information about trades, liquidation activity and customer identities.
The agreements are meant to quell the SEC’s concerns about bitcoin-related market manipulation, a common claim the agency has repeatedly denied of spot bitcoin ETFs since 2013.
However, the court said in its opinion on Tuesday that the existing Bitcoin futures ETF oversight sharing agreement, which will first be listed in 2021 after SEC approval, should be sufficient to mitigate these effects.
“The underlying assets — bitcoin and bitcoin futures — are closely related,” the opinion states. “The monitoring sharing protocol with the CME is the same and should have the same possibility to detect activity in bitcoin and bitcoin futures markets.” fraudulent or manipulative conduct.”
The court opinion called into question whether some firms might change the surveillance sharing agreements outlined in their filings to reflect Grayscale or other approved bitcoin futures ETFs.
To be clear, there are scant details about Coinbase’s compensation in dealings with Nasdaq and CBOE in multiple spot Bitcoin ETF applications (including BlackRock and Invesco), so it’s hard to tell if Coinbase might be How much income is earned.
“It’s hard to tell at the moment because they haven’t revealed that,” Needham & Company analyst John Todaro told Decrypt. “From a public information standpoint, it seems like we’ll have to wait and see what we get. kind of information.”
Still, there is clearly some optimism on Wall Street.
Sacha Ghebali, director of strategy at cryptocurrency analytics platform The Tie, told Decrypt that while the court sided with Grayscale on the adequacy of existing surveillance-sharing agreements, that doesn’t mean spot and futures markets shouldn’t be monitored simultaneously. .
“The court’s main argument is that the SEC failed to present evidence that fraud and manipulation could have affected the spot market differently than the regulated futures market,” he said. “However, it is still important to monitor for fraud and manipulation, as the ultimate goal is to discover prices in ‘clean’ markets.”
