Coinbase’s Huge Role in Proposed Bitcoin ETFs Raises Big Questions

In this issue of the Bloomberg Crypto newsletter, Michael P. Regan wonders what the SEC thinks about the huge role that Coinbase is poised to play in proposed spot-Bitcoin ETFs.

When it comes to discussions about the US finally approving a spot-Bitcoin ETF or issuing more rejections, there’s a gorilla in the room that few seem to be acknowledging: Coinbase Global Inc.

The largest US crypto exchange – and the only one that’s a public company – is poised to play a major role as a middleman between the crypto market and the traditional equities market where the exchange-traded funds would trade.

The only twist? The Securities and Exchange Commission sued Coinbase in June, alleging that the company acted as an exchange, broker-dealer and clearinghouse without registering with the agency for any of those roles.

At the time, the company’s chief legal officer said it would fight the SEC in court while simultaneously pushing for a legislative solution on crypto regulations that the company hoped would advance in the House of Representatives by the end of the summer. That didn’t happen, of course, and anyone who’s been paying attention to US politics knows Congress can barely agree on a lunch order – or even to keep the government open, for that matter -- let alone pass major legislation like that. There was even talk at the time that the legal battle between Coinbase and the SEC could end up in the Supreme Court, yet the case hasn’t even gone to trial yet. And the US high court sort of has its hands full at the moment anyway with, you know, the whole future of American democracy and whatnot.