BlackRock’s Bitcoin ETF Application Unveils Unprecedented Surveillance Powers – SEC’s possible decision

The U.S. Securities and Exchange Commission has rejected numerous applications for a Bitcoin Spot ETF in the past. Presently, another leading asset management firm is at the mercy of the SEC, as it awaits a response, which many believe could be negative.

Billion Dollar Asset Manager, BlackRock, recently filed for a Bitcoin ETF in the United States. If approved, the Bitcoin spot ETF will become the first of its kind in the country. However, according to industry players, the chances of BlackRock’s application getting accepted are extremely low.

On the other hand, a positive response could completely change the course of the cryptocurrency market. On previous occasions, the SEC has rejected applications from other leading firms, for many different reasons.

One such, as disclosed by the Wall Street Journal, was the inadequacy of applications from Nasdaq and Cbeo, which, according to the SEC, failed to state the market that the fund sponsors working on their surveillance-sharing agreements are engaged in. The future of BlackRock’s Bitcoin ETF also strongly hinges on the information-sharing deal.

Market players have pointed out some concerning trades in BlackRock’s filing. This could cause authorities to flag its ETF application. This information-sharing agreement could give regulators the power to request additional background information from BlackRock. It could also give regulators and ETF providers the ability to pull up data from the exchanges.

The CIO of Bitwise speaks on the importance of the information-sharing agreement in ETFs

This kind of information is often specific and seeks out data on traders and trades. Personal information like customers’ names and addresses could also be required by regulators, according to the agreement. An insider source explained that information-sharing requests are usually specific and very different from subpoenas. The source is quoted saying ;

It can’t just be a fishing expedition, where it’s all of the information attached to any trade that was made between two given points in time. The obvious concern is that crypto traders, almost by definition, don’t like having information shared about them. It’s sort of anathema to the ethos of crypto in general. But for the ETF to be successful, [firms]have to do it.

The SEC has previously stressed the need for Bitcoin ETF applications to contain a surveillance-sharing agreement with a regulated market. However, Matt Hougan, the Chief Investment Officer at Bitwise Asset Management, explained that adding an information-sharing agreement instead of surveillance carries more weight as it implies that the ETF is not dependent on an unregulated market.

“If there’s an ability to pull, then that’s coming from the regulated market; an ability to push is coming from the unregulated market. So, the SEC will want the ability for the regulated market to oversee this surveillance, and in terms of identifying the people at the bottom of these trades, I think that’s just going to be part and parcel of these agreements.” The Bitwise CIO asserted.