bitcoin etf: Reading the tea leaves: Why BlackRock ETF will overcome SEC hurdles


Experts believe that the BlackRock Bitcoin exchange-traded fund (ETF) is more likely to get approval from the U.S. Securities and Exchange Commission (SEC) compared to previous ETF filings due to its surveillance agreement with Coinbase and NASDAQ. The SEC has expressed concerns about the lack of surveillance and fraud detection in the spot market, and the involvement of Coinbase, a major exchange, in providing data on Bitcoin trading to NASDAQ addresses these concerns.

Rajagopal Menon0

Rajagopal Menon


The approval of a Bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC) has been widely debated and speculated. Despite past rejections, experts such as Elliot Johnson, COO and CIO of Evolve ETF and a pioneer of Bitcoin ETFs in Canada, believe that the BlackRock ETF stands a higher chance of receiving approval from the SEC.

One of the primary concerns expressed by the SEC regarding previous ETF filings has been the underlying spot market. The SEC has consistently highlighted the distinction between the Futures market, which they have confidence in, and the spot market, where the majority of trading volume occurs. The SEC has expressed concerns about the lack of sufficient surveillance and detection of fraud and manipulation in the spot market.

The key to the BlackRock filing lies in the surveillance agreement they have managed to establish between Coinbase and NASDAQ. The rules governing ETFs emphasize the need for surveillance of a venue of significant size where the underlying asset trades. Coinbase, with its substantial size, satisfies this requirement, and the surveillance mechanism is facilitated through NASDAQ’s existing technology. NASDAQ’s surveillance system has a proven track record in monitoring various assets traded on its platform. The inclusion of such surveillance measures in the BlackRock ETF filing showcases BlackRock’s understanding of the importance of addressing regulatory concerns and its proactive approach to meeting those needs.

Another significant factor supporting the approval of the BlackRock ETF is the regulatory environment surrounding Bitcoin. The SEC has publicly stated that Bitcoin is considered a commodity rather than a security. This aligns with the stance of the Commodity Futures Trading Commission (CFTC), which regulates Bitcoin futures. The recognition of Bitcoin as a commodity, coupled with the involvement of Coinbase, a major exchange, in providing data on Bitcoin trading to NASDAQ, adds weight to the case for approval. NASDAQ’s surveillance system enables regulators to monitor both the trades of the underlying asset and the ETF itself, fulfilling their regulatory obligations.

Did you Know?

S has launched a new enterprise on the Metaverse with the aim of accelerating cloud adoption among Indian firms. The interactive and immersive ‘cloud on wheels’ platform will enable customers to experience the full range of S ’s offerings and reimagine processes for improved business outcomes.

View Details »Moreover, it is worth noting that other exchanges are also actively working on building similar surveillance capabilities. NASDAQ is not the only exchange with listings related to ETFs; the Chicago Board Options Exchange (CBOE) is also filing listings. This eagerness to enhance surveillance systems further underlines the importance of such measures and strengthens the overall case for approval.

The index price utilized by the BlackRock ETF, provided by CF Benchmarks, is another factor in favor of approval. CF Benchmarks, a UK-based firm owned by Kraken, serves as the reference and settlement price for Bitcoin futures. With billions of dollars worth of Bitcoin futures settled based on CF Benchmarks’ reference rate, they have established themselves as one of the most regulated index providers in the cryptocurrency space. They comply with regulations in the United States, the UK, and Europe. The stringent rules they adhere to ensure the legitimacy and integrity of their contribution to the ETF.

Furthermore, the contributing exchanges for CF Benchmarks employ robust measures against manipulative practices. These exchanges undergo thorough scrutiny and must meet specific criteria set by the CFTC. With protections against wash trading and surveillance systems in place, these exchanges are considered legitimate entities for Bitcoin trading. CF Benchmarks also employs a meticulous methodology for determining the index price, taking into account the last hour of trading in five-minute increments and eliminating extreme price outliers. This design prevents price manipulation, as attempting to change the index price significantly would require attacking the five best-run Bitcoin exchanges every five minutes for a full hour.

The BlackRock ETF presents a strong case for approval by addressing the SEC’s concerns regarding the underlying spot market through a robust surveillance agreement between Coinbase and NASDAQ. The collaborative effort between these entities demonstrates a proactive approach to regulatory compliance and sets a precedent for other exchanges to enhance their surveillance capabilities. Additionally, the involvement of CF Benchmarks as a highly regulated index provider adds credibility to the ETF’s pricing mechanism and safeguards against price manipulation. With these factors in play, the BlackRock ETF is well-positioned to meet the SEC’s criteria and stands a strong chance of gaining approval. As the regulatory landscape evolves, the approval of a Bitcoin ETF would mark a significant milestone, providing investors with increased access to digital assets within a regulated framework.


Updated: 07/01/2023 — 05:00

Leave a Reply

Your email address will not be published. Required fields are marked *