With Blackrock waiting for its Bitcoin ETF approval from the SEC, the surveillance surrounding the issue is set to go to the next level. World’s biggest asset manager shocked the world by filing for BTC ETF on June 15. The timing was crucial as the industry faces the Securities and Exchange Commission (SEC) and other authorities amidst a regulatory crackdown.
BlackRock’s BTC ETF Application Takes Scrutiny to Another Level
Experts think the world’s biggest asset manager has a better chance of getting approval for Bitcoin ETF. Moreover, the application started a slew of follow-on filings with the Surveillance-Sharing Agreement (SSA). The SEC might nod to the application if the information-sharing deal, which gives added power to the regulator, is taken care of.
The agency argues that the information sharing/ surveillance sharing protocol is in place to circumvent market manipulation of cryptocurrencies. These requirements first surfaced in 2017 when the Winklevoss twins applied for BTC ETF. Also, the details of the “Coinbase and NASDAQ Information Sharing Term Sheet” were required.
It appears to be a tug of war for data here; the SSA concerns the data surveillance carried out by spot exchanges be pushed to regulators, ETF providers and listing exchanges. Also, the information-sharing agreement allows the ETF providers and regulators to pull this data from the exchange.
The information in the limelight here could be about specific trades or traders. The agreement would also push the crypto exchanges to share data, including personally identifiable information (PII). These would include the customers’ names, addresses, and other details. Information sharing agreement does not appear in any of the Bitcoin ETF filings. However similar structure is found in other markets.
Another important aspect is that the information-sharing request has to be specific and different from the subpoena. A person familiar with the matter said the scenario could be further from a fishing expedition, where all the information regarding any trade is made between two points at a time.
The obvious concern is that crypto traders wish to avoid being identified and prefer to keep their information private. They came into crypto trading for this very reason. But if the Exchange Traded Fund scenario is to be a success, this has to be done, nonetheless.
In the recent Bitcoin ETF applications, the Securities and Exchange Commission has found some things that need to be improved and has asked the applicants to refile. Only time will tell who will receive the first nod and how shall this scenario help the crypto industry.
How will it help Information Sharing?
The unique combination of information and surveillance sharing is well-known to brokers and exchanges in the equity markets. They have been doing this for a long time. Here the regulatory authority can ask for extra information regarding a client’s trading history, and they have to oblige.
For instance, a broker has a client, and an order is sent to NASDAQ, and somehow this order gets flagged as suspicious by the exchange’s SMARTS surveillance systems. Then the broker and the exchange are required to file a suspicious activity report (SAR).
While investigating the SAR report, regulators can decide to go a step further and request PII to identify if the same beneficial owners are behind the given set of trades. If so, the scenario might invite a consolidated audit trial.
If the SEC approves BlackRock’s Bitcoin ETF, the other filings might also get approved. Though there is speculation about its functioning and information sharing, it will provide exposure to crypto assets, inadvertently increasing the adoption rate of cryptocurrencies.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2023/07/12/blackrocks-btc-etf-application-summons-next-level-surveillance/