Home / Bitcoin / Fidelity Not Giving Up on Bitcoin ETF: Application Resubmitted Naming Coinbase as Surveillance Partner
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Fidelity Not Giving Up on Bitcoin ETF: Application Resubmitted Naming Coinbase as Surveillance Partner

Published July 3, 2023 2:57 PM
Omar Elorfaly
Published July 3, 2023 2:57 PM

Key Takeaways

  • CBOE resubmits application for a would-be first U.S. Bitcoin ETF.
  • The SEC requires Bitcoin ETF fund sponsors to list markets for the underlying asset.
  • The likes of Fidelity intend to list their Bitcoin ETFs on CBOE.

The Chicago Board Options Exchange (CBOE) has refiled a submission for a Bitcoin exchange-traded fund (ETF) following feedback from the United States Securities and Exchange Commission (SEC).

Fidelity is among a handful of mainstream fund managers that have tendered applications to the SEC to launch Bitcoin ETFs in the U.S. Fidelity intends to launch the product on CBOE, while BlackRock, the world’s largest asset manager, grabbed headlines for its proposed Bitcoin ETF which is set to be offered on the NASDAQ.

The likes of WisdomTree, VanEck, ARK Invest and Galaxy Digital are also in the process of applying for permission to launch their own Bitcoin ETFs on CBOE. The SEC has since told both CBOE and NASDAQ that its respective filings are ‘inadequate ’ due to the omission of declarations relating to the markets in which the Bitcoin ETFs will derive their value.

Deterring Fraud and Market Manipulation

CBOE’s amended filing with the SEC highlighted its efforts to take additional steps to ensure its ability to detect, investigate and deter fraud and market manipulation of shares in the proposed Wise Origin Bitcoin Trust. 

“The Exchange is expecting to enter into a surveillance-sharing agreement with Coinbase, an operator of a United States-based spot trading platform for Bitcoin that represents a substantial portion of US-based and USD denominated Bitcoin trading.”

CBOE’s filing added that the agreement with Coinbase is expected to carry the ‘hallmarks of a surveillance-sharing agreement’. This will give CBOE supplemental access to Bitcoin trading data on Coinbase.

The stock exchange also added that data from Kaiko Research indicated that Coinbase represents roughly 50% of the US Dollar to Bitcoin daily trading volume in May 2023.

This is a pertinent point given that the SEC had previously raised concerns about the depth of Bitcoin trading markets when it had denied previous filings for similar Bitcoin ETFs over the past few years.

A surveillance-sharing agreement is intended to ensure that exchanges and regulators are able to detect whether a market actor is manipulating the value of stocks or shares.

How Long Will it Take to Issue an ETF?

The SEC is yet to confirm whether it has begun to review the most recently filed Bitcoin ETF applications. 

The agency will enter a 45-day review period once it has published the filings in the Federal Register  and also has the option of extending this period to as long as 240 days. 

The SEC is Suing Coinbase

Coinbase is a central pillar in the Bitcoin ETF filings from both Fidelity and BlackRock. BlackRock intends to use the firm as its BTC custodian while Fidelity’s Wise Origin Bitcoin Trust’s latest filing lists the U.S. exchange as its surveillance-sharing partner.

The SEC charged  Coinbase in June 2023 for allegedly operating as an unregistered securities exchange as well as offering and selling unregistered securities in connection with its staking-as-a-service program.

Despite the litany of charges against the exchange and the ongoing legal battle, cryptocurrency proponents believe that the filing of Bitcoin ETF by major asset managers suggests that there is great confidence that a positive outcome may be reached.