Bitcoin Spot ETF Applications Refiled To Bring Coinbase Surveillance to Next Level
Cboe amended five spot Bitcoin EFT filings on Tuesday to add that it has “reached an agreement on terms” with Coinbase to enter into surveillance-sharing agreements.
- "An Information-Sharing Agreement, which appears to be absent from public spot Bitcoin ETF filings, compels a crypto exchange to share trading data up to and including personal information such as a customer’s name and address."
- "While the SEC’s requirement for surveillance sharing to prevent market manipulation of crypto is not new – it first appeared in the Winklevoss Bitcoin ETF application in 2017 – details of a “Coinbase and NASDAQ Information Sharing Term Sheet” shared with CoinDesk point to something more."
"An important caveat is that an information-sharing request has to be very specific, [similar] to a subpoena, according to a person familiar with the matter.
- "The combination of surveillance sharing and information sharing is a structure known to brokers and exchanges in equities markets, where the regulator has the authority to request more information about the end client’s trading history."
- "Whenever a broker has a client that sends an order to Nasdaq, for example, and that order is flagged as suspicious by the exchange’s SMARTS surveillance system, then the broker and the exchange are required to file a suspicious activity report (SAR)."
- "Regulators investigating a SAR can go on to this “second step,” said Dave Weisberger, CEO of crypto trading platform CoinRoutes, which is requesting personally identifiable information (PII) to identify whether the same beneficial owners are behind a given set of trades, creating a consolidated audit trail," CoinDesk reported.
"Coinbase, Nasdaq and BlackRock are likely saying that if there is suspicious activity – and they are surveilling for it – then the regulator can request who’s doing it, but they’re not just going to give out PII willy-nilly. There is going to have to be suspicious activity. That is the equivalency here,” Weisberger said in an interview, adding:
- “If that is true, I believe the SEC will not only approve this ETF, but will approve it and take a victory lap. And considering how unpopular this SEC is, I suspect they need to do that now.”
