Cboe refiles Fidelity bitcoin ETF application, plans Coinbase policing partnership

June 30, 2023 9:47 AM EDT

FILE PHOTO: A Bitcoin logo is displayed at the Bitcoin Center New York City in New York's financial district July 28, 2015. REUTERS/Brendan McDermid/File Photo

By John McCrank and Carolina Mandl

(Reuters) -Exchange operator Cboe on Friday refiled an application with the U.S. securities regulator to launch a bitcoin exchange-traded fund by asset manager Fidelity, saying it would work with global crypto exchange Coinbase to prevent any market manipulation in the process.

The refreshed filing aims to address concerns raised by the U.S. Securities and Exchange Commission (SEC), which told Cboe that its recent filing to list and trade a spot bitcoin ETF from Fidelity was unclear and incomplete, according to a person familiar with the matter. The SEC raised the same concerns with Nasdaq over a recent filing for a spot bitcoin ETF from BlackRock, the person said.

A key issue was that the exchanges did not name the crypto-trading platforms with which it planned to enter into surveillance-sharing agreements to help detect fraud in the underlying bitcoin markets, the person said.

Cboe also refiled listing applications with the SEC on Friday for bitcoin ETFs by WisdomTree, VanEck, and a joint effort from Invesco and Galaxy. It said in all of the filings it plans to enter into a surveillance-sharing agreement with Coinbase.

The SEC, Cboe, Nasdaq, Fidelity, and BlackRock declined to comment. Coinbase was not immediately available for comment.

The SEC this month sued Coinbase for failing to register as an exchange. According to Cboe's Fidelity bitcoin ETF filing, The company's platform represented roughly half of U.S. dollar-bitcoin trading in May.

Coinbase said in a letter filed late on Wednesday in Manhattan federal court it will ask a judge to toss the SEC lawsuit, arguing the regulator lacks authority to pursue civil claims because the crypto assets trading on its platform are not "investment contracts," and thus not securities.

The SEC is also suing Binance, alleging that the world's biggest crypto-trading platform is operating a "web of deception."

"The marketplace is not only not transparent and not audited but it's also, according to the SEC, rife with manipulation," said John Reed Stark, a former chief of the SEC's Office of Internet Enforcement said of the cryptocurrency market.

The recent filings for bitcoin ETFs by BlackRock and Fidelity have sent the price of bitcoin soaring more than 20% since June 15 to one-year highs.

Cryptocurrency prices had been under pressure through most of this year a series of crypto company meltdowns, including the sudden collapse of exchange FTX in late 2022, soured investor sentiment.

The fact that the price of bitcoin held up well after the SEC asked for more information on the bitcoin ETF filings suggested sentiment is not turning bearish, said Ed Moya, senior market analyst at Oanda.

"It's not surprising to hear that the SEC is pushing back a little bit," he said of the bitcoin ETF applications. "I don't think it was realistic to expect that they were going to immediately concede and grant a quick approval."

The SEC has rejected dozens of spot bitcoin ETF applications in recent years, including one from Fidelity in January 2022.

In all the cases, it said the filings did not meet the standards designed to prevent fraudulent and manipulative practices and protect investors and the public interest.

(Reporting by Carolina Mandl and John McCrank, in New York, and Manya Saini in Bengaluru; Additional reporting and editing by Michelle Price. Editing by Shinjini Ganguli, Michelle Price, Alexander Smith and David Gregorio)

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