Coinbase chief legal executive Paul Grewal is optimistic that Grayscale Investments’ victory over the United States Securities and Exchange Commission (SEC) will spark numerous opportunities. He believes that Coinbase would tap the opportunity to offer custodian services towards safeguarding the clients’ assets.
Grewal considers that the Grayscale Investment victory in court constitutes a blessing that catapulted the entire crypto market into the green. Besides the strong indication of a probable Bitcoin exchange-traded fund (ETF) in the US, the victory opened a flying start for Coinbase on Wall Street.
Coinbase Riding on Grayscale Investments’ Victory Over SEC
Coinbase rode on Grayscale’s victory over SEC to have its bid to convert the Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF reviewed. As such, Coinbase stock rallied 15% as the markets closed on Tuesday. The gains dwarfed the 7% gain in Bitcoin in the past 24 hours, as tracked by CoinGecko.
The uptrend came following the US Court of Appeals in the DC Circuit granted Grayscale a plea to direct the Gary Gensler-led SEC to review its bid for spot Bitcoin ETF. The victory aligned with the previous pronouncement by Grayscale in July that the SEC should consider approving all applications. It downplayed the move to pick winners and losers in the applications under review.
Grewal observed that the anticipation of likely approval of Bitcoin ETF places Coinbase in an advantageous position to deploy its custodian services in safeguarding clients’ assets. He considers the leading crypto exchange in the US to assume the role of custodian of choice.
Grewal submitted that the devotion of Coinbase to enter the surveillance-sharing agreements with the listing exchanges affirms its commitment to support and facilitate compliance efforts.
BlackRock is among the notable applicants awaiting the SEC to review their bid for spot Bitcoin ETF. The asset manager, with a portfolio estimated at $8.5 trillion, identifies Coinbase as the custodian party. The derivative product would offer indirect exposure to the Bitcoins without holding them.
Coinbase is poised to play a critical custodian role for BlackRock and subsequent applicants. However, Valkyrie struck off the exchange when amending the applications. Hashdex, as the latest entrant, avoids the surveillance-sharing agreement with Coinbase.
Coinbase Surveillance Sharing Agreement Needed in Bitcoin ETF
The prospective opportunity to offer custodian services is evident in Coinbase’s latest move to establish the surveillance-sharing agreements featuring Nasdaq and Cboe BZX Exchange, where the applicants intend to list the spot Bitcoin ETFs.
The agreements tasks Coinbase is facilitating fraud detection and avert potential market manipulation. Additionally, Coinbase would offer trading briefing, customer verification, and clearance activity. By doing so, the agreement will resolve concerns raised by the SEC over Bitcoin market manipulation featured in a sequence of spot Bitcoin ETF denials since 2013.
The Court of Appeals held that the surveillance-sharing agreements since 2021 for the Bitcoin futures ETFs approved by the SEC are enough to moderate.
Grewal observed that the court held that Bitcoin and Bitcoin futures are closely correlated. Consequently, the surveillance-sharing agreements entered with CME portray an identical nature to detect manipulative and fraudulent conduct in bitcoin and bitcoin futures.
The court’s opinion will likely prompt applicants for Bitcoin ETF to adjust their surveillance-sharing agreement to one deployed by Grayscale. Such eventuality is uncertain as details concerning Coinbase’s agreement with Cboe and Nasdaq are unknown.
Coinbase Ready for Active Custodial Role
Needham & Company executive John Todaro observed that though the parties are yet to disclose the agreement details, Wall Street is optimistic of Coinbase leaping benefits of being the exclusive provider of custodian services.
The Tie strategic executive Sacha Ghebali indicates that monitoring the spot and futures markets is fundamental. Doing so is critical despite the court’s admitting Grayscale argument of sufficiency in the existing surveillance-sharing agreements.
Ghebali indicated that the court observed that the SEC failed to provide evidence that regulated futures and spot markets could suffer fraud and manipulation. It showed faith in the surveillance-sharing agreement that Coinbase is positioned to play to ensure the price discovery occurs within a clean market context.
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