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Coinbase Elephant in Bitcoin ETF Room, Role in Proposed Products Questioned 

2 mins
Updated by Ciaran Lyons
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In Brief

  • Coinbase is central to the operation of proposed spot Bitcoin ETFs, providing roles such as custody, trading execution, and market surveillance.
  • The SEC's ongoing lawsuit against Coinbase for allegedly operating illegally poses a potential risk to ETF issuers relying on the firm.
  • Despite legal battles, Coinbase claims to be ready for ETF approval, touting the resilience of their products and their robust track record.
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As spot Bitcoin exchange-traded fund (ETF) fever heats up, eyes are turning to the major players and they’re not all big asset managers such as BlackRock and Fidelity. 

Coinbase is positioned to play a major role as a middleman between the crypto market and traditional stock exchanges if the SEC approves spot Bitcoin ETFs.

Exchange’s Role Under Spotlight 

According to a Jan. 4 Bloomberg report, Coinbase is the “gorilla in the room that few seem to be acknowledging.”

Coinbase is the only crypto exchange in the United States that is also a publicly listed company. 

Moreover, the firm will be a central component of how these spot-Bitcoin ETF securities operate. It will provide several key roles including custody, trading execution, market surveillance, and even lending.

However, the dark cloud looming over these potential partnerships is the Securities and Exchange Commission. 

The federal finance regulator sued Coinbase in June for allegedly operating illegally as an unregistered securities exchange, broker-dealer, and clearinghouse.

Moreover, the legal battle between Coinbase and the SEC is still ongoing, with no resolution yet. 

ETF issuers including BlackRock have acknowledged they are dependent on Coinbase and have flagged the case against them in their risk disclosures.

Read more: How To Prepare for a Bitcoin ETF: A Step-by-Step Approach 

A spokesperson for Coinbase told the outlet: 

“We have extensively prepared for ETF approval – we are the service provider of choice precisely because of the resiliency of our products and our robust track record.”

In late December, crypto podcaster Preston Pysh commented on another aspect of Coinbase’s involvement. 

“Anyone else stunned at the lack of discussion and concern around Coinbase… yes that PoS exchange, as the primary custodian for *ALL* of these ETFs’ coins? I’m sorry, but if you are buying these ETF products just know: YOU DON’T OWN Bitcoin!”

Bitcoin ETF Latest Developments

On Jan. 5, ETF Store president Nate Geraci highlighted a number of media reports. These all cited “sources close to the SEC” reporting that Bitcoin ETFs could begin trading next week. 

Bloomberg ETF analyst James Seyffart chimed in that he was not expecting official Bitcoin ETF approval orders tomorrow, but “Still expecting them January 8th-10th.”

Also on Jan. 5, Messari founder Ryan Selkis commented: 

“The thing people are missing about the Bitcoin ETF is that it’s a “cross the rubicon” moment. Crypto will have a long-awaited wedge into mainstream global finance.”

Meanwhile, crypto markets were back up 1.9% on the day with total capitalization reaching $1.73 trillion.

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Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...