Among asset managers worldwide, anticipation has reached a fever pitch for the approval of spot Bitcoin ETF. While the potential for these ETFs to drive significant capital and investment into the crypto industry, including Bitcoin, is remarkable, there are concerns that analysts may have overlooked. 

BitGo CEO Mike Belshe has expressed reservations about the likelihood of the US Securities and Exchange Commission (SEC) approving spot Bitcoin ETF applications due to Coinbase’s integration as both an exchange and custodian. 

Belshe argues that the risks associated with Coinbase’s multifaceted role have not been fully understood, potentially leading to further rejections before positive news emerges.

In a recent interview with Bloomberg, Belshe shared his insights on the state of Bitcoin ETF applications and their challenges. While expressing optimism and acknowledging positive conversations between applicants and the SEC, Belshe believes another round of rejections may be necessary to address market structure concerns. 

Belshe cites SEC Chairman Gary Gensler’s emphasis on separating exchanges from custody, drawing parallels with how the equity market operates. Belshe also alludes to Coinbase’s role as an exchange, custodian, and broker-dealer, highlighting the risks within the entity that may not be fully comprehended.

Belshe’s concerns stem from Coinbase’s integration of multiple functions within its platform. While he clarifies that Coinbase is not on the same level as bankrupt crypto exchange FTX and its co-founder Sam Bankman-Fried, Belshe asserts they are employing a “similar playbook.” 

Coinbase presents risks that the crypto community may not fully understand by operating as an exchange, custodian, and broker-dealer simultaneously. Belshe suggests that the SEC might require a complete separation of these functions before approving Bitcoin ETF.

While highlighting the challenges of Coinbase’s integration, Belshe emphasizes that viable solutions are available. He points to custodians like BitGo, specializing in custody services without engaging in exchange or trading activities. 

By utilizing custodians like BitGo, the industry can address the need for separation between exchanges and custody, potentially paving the way for SEC approval of Bitcoin spot ETFs, Belshe said. 

Overall, as Bitcoin spot ETFs’ excitement continues to build, BitGo CEO Mike Belshe has raised concerns about the integration of Coinbase as both an exchange and custodian. 

Belshe believes that the SEC may reject Bitcoin ETF applications until Coinbase’s functions are fully separated. As the industry eagerly awaits regulatory decisions, the debate surrounding Coinbase’s role in Bitcoin spot ETFs adds a layer of complexity to the ongoing discussions.

As of the time of writing, Bitcoin, the leading cryptocurrency in terms of trading volume, is currently valued at $36,100. This price reflects a 1% retracement over the past 24 hours and a decline of over 2% in the past seven days.

Featured image from Shutterstock, chart from TradingView.com 

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