Breaking News
Investing Pro 0
Canadian Edition Available
Would you prefer Investing.com's Canadian edition?
Stocks Are Hot! Get 50% Off InvestingPro Now 🌞 CLAIM OFFER

Coinbase Stock Surges Post Flurry of Bitcoin ETF Applications

By The Tokenist (Timothy Fries )Market OverviewJul 11, 2023 01:18AM ET
www.investing.com/analysis/coinbase-stock-surges-post-flurry-of-bitcoin-etf-applications-200639860
Coinbase Stock Surges Post Flurry of Bitcoin ETF Applications
By The Tokenist (Timothy Fries )   |  Jul 11, 2023 01:18AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
BTC/USD
+0.46%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BTC/USD
+0.47%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
COIN
-0.91%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Despite the SEC’s entanglement, Coinbase (NASDAQ:COIN) secured the go-to status for Bitcoin ETF applications.

When BlackRock filed for Bitcoin ETF on June 15th, it triggered an avalanche of similar (re)filings. The SEC has refused every application since the Winklevoss brothers of Gemini Exchange filed it first in 2013. Still, BlackRock, the world’s largest asset manager holding $9 trillion, has an unmatched SEC approval rate of 575 to 1 rejection.

Two weeks later, the odds for another SEC approval became exceedingly high when the watchdog agency asked BlackRock for market surveillance clarification. The bullish implication is that the SEC needed to dot all the i’s and cross all the t’s before committing to an approval.

On June 29, Nasdaq refiled BlackRock’s exchange-traded fund, listing Coinbase Global Inc (COIN) as its surveillance partner. Alongside BlackRock, all six Bitcoin ETF applicants followed suit – Ark Invest, Fidelity, WisdomTree, Invesco, and VanEck.

SEC’s Stance on Coinbase Explained

It is highly unusual for investment heavyweights to pick Coinbase as the partner for a shared surveillance agreement. The SEC demands this requirement to ensure a mechanism for detecting and minimizing market manipulation, conflict of interest, and fraud. In this case, it would be Coinbase monitoring the underlying asset, Bitcoin, for upcoming spot-traded ETFs.

The SEC’s official core mission is to protect investors. This includes the prevention of wash trading, pump-and-dump schemes, and spoofing. However, the same agency accused Coinbase of being an unregistered broker, making “billions of dollars unlawfully facilitating the buying and selling of crypto asset securities.”

Furthermore, the SEC alleged that Coinbase deprived “investors of critical protections, including rulebooks that prevent fraud and manipulation.”

At a glance, this seems exceedingly contradictory. However, if the SEC lawsuit against Coinbase is placed in the context of Operation Chokepoint 2.0, clearing the road for TradFi, the contradiction fades. Namely, the SEC is engaging in regulatory overreach as it probes the legislative void around crypto assets.

Paul Grewal, Coinbase’s Chief Legal Officer, hinted at this after filing for the move to throw out the SEC’s case, to which SEC responded by purportedly ignoring established legal practice:

“They ignore the clear and unmistakable warnings of the Supreme Court just last week against regulatory overreach in major questions reserved to Congress.”

Namely, the SEC pushes the ‘regulation by enforcement’ envelope out of its bounds. By the same token, the TradiFi investment firms are confident in naming Coinbase as the Bitcoin ETF surveillance custodian.

That’s because their underlying assumption is that this is the SEC’s true intent, not that the agency views Coinbase as fraudulent to the extent of harming investors the agency is charged to protect.

Coinbase Already Established Regulatory Compliance Chops

Preemptively, Brian Armstrong, Coinbase CEO, established strong ties with the USG shortly after going public under the COIN ticker in April 2021. In September 2021, the exchange signed a deal with the Department of Homeland Security (DHS) worth $1.8 million to supply DHS with blockchain analytics software.

This deal extended to Immigration and Customs Enforcement as well. Due to these proactive efforts to surveil cryptocurrency activity, Coinbase became the expected beneficiary of the milestone deal with BlackRock, in August 2022.

Called “the fourth branch of government” by Bloomberg, BlackRock selected Coinbase to access its sophisticated Aladdin end-to-end portfolio management system, thus providing crypto rails for institutional investors.

SEC FUD Priced in for COIN Shares?

When contrasted against institutional support, Coinbase’s entanglement with the SEC has largely been neutralized. This is evident by COIN stock recovery, even with the pending unresolved SEC situation.

Coinbase Inc Daily Chart
Coinbase Inc Daily Chart

This suggests that the SEC-induced FUD is already priced in. If BlackRock’s Bitcoin ETF goes through, along with the other five investment firms that picked Conbase as a surveillance partner, the exchange could manage more bitcoins than Grayscale Bitcoin Trust.

GBTC, as an over-the-counter (OTC) traded fund, currently holds 625,560 BTC represented as shares. However, considering that GBTC is owned by Barry Silbert’s Digital Currency Group (DCG), it is unclear if this will last. Gemini’s CEO Cameron Winklevoss is actively pursuing Silbert for paying back $1.47 billion owed to Gemini Earn customers.

With this uncertainty in play, Coinbase is bound to benefit, reaping the rewards from transaction fees. Conversely, Coinbase’s revenue could see a significant boost by the year’s end, which would sharply reflect on its stocks. Much will hinge on the judicial system, just like in the case of Ripple Labs.

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

***

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

Coinbase Stock Surges Post Flurry of Bitcoin ETF Applications
 

Related Articles

Coinbase Stock Surges Post Flurry of Bitcoin ETF Applications

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email