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(Kitco News) - Alternative asset management firm Valkyrie has become the latest firm to re-file its application for a spot Bitcoin (BTC) exchange-traded fund with the U.S. Securities and Exchange Commission (SEC) after the regulator said the initial documents were inadequate.
The July 3 filing with the SEC – which was submitted by Nasdaq, the exchange that will list the Valkyrie Bitcoin Fund if it is approved – was amended to list Coinbase Global Inc. as Valkyrie’s partner in a surveillance-sharing agreement (SSA).
Partnering on an SSA means the firm hosting a Bitcoin-related market must share information about market trading activity, clearing activity, and customer identity.
The filing shows that Nasdaq and Coinbase came to an agreement on June 30 that would give Nasdaq “supplemental access to data regarding spot Bitcoin trades occurring on Coinbase if it is determined to be necessary as part of its surveillance program for the Commodity-Based Trust Shares.”
Coinbase is consistently responsible for more than 50% of the market share of BTC/USD spot trading volume, which is the reason the exchange was selected as the SSA partner for Valkyrie’s Bitcoin fund.
“Trading of Bitcoin on Coinbase represents a significant portion of US-based Bitcoin trading,” the exchange said in the filing. “According to the Sponsor, the Exchange aims to enter into a surveillance-sharing agreement with Coinbase, the operator of the largest United States-based spot trading platform for Bitcoin representing a majority of global spot BTC trading paired with USD.”
According to the filing, the investment objective of the Trust is for its shares “to reflect the performance of the value of a Bitcoin as represented by the CME CF Bitcoin Reference Rate - New York Variant (the “Index”), less the Trust’s liabilities and expenses.”
The stated purpose of the Trust is “to provide investors with a cost-effective and convenient way to invest in Bitcoin in a manner that is more efficient and convenient than the purchase of a stand-alone Bitcoin, while also mitigating some of the risk by reducing the volatility typically associated with the purchase of stand-alone Bitcoin and without the uncertain and often complex requirements relating to acquiring and/or holding Bitcoin,” the filing said.
Surveillance-sharing agreements have become a focal point for Bitcoin ETFs recently, and BlackRock, Fidelity, Invesco/Galaxy, WisdomTree, VanEck and ARK have all re-filed their spot Bitcoin ETF applications over the past week to list Coinbase as their SSA partner.
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| BlackRock re-files spot Bitcoin ETF naming Coinbase as SSA exchange |
Numerous analysts have suggested that the addition of SSA agreements to the recent filings is the key to gaining SEC approval for a spot BTC ETF. The surveillance can help significantly reduce fraud and market manipulation, which were the top reasons the SEC cited in their rejection of roughly 30 spot Bitcoin ETF applications to date.
According to Ophelia Snyder, co-founder and president of 21Shares – which partnered with ARK for its spot-Bitcoin ETF application – surveillance-sharing agreements are a standard market practice.
“In this case, it’s actually which exchange it is that changes the conversation,” Snyder said on Bloomberg TV’s ETF IQ show. While there have been surveillance-sharing agreements in the past, “Coinbase represents such a large proportion of the US market for these products and is so well-established in this market that that’s actually the major difference.”
