Mike Belshe, the CEO of BitGo, a prominent player in the cryptocurrency custody service, recently voiced his concerns about the ongoing efforts to launch a Bitcoin Exchange-Traded Fund (ETF) in the United States. Despite a wave of optimism sweeping through the industry, Belshe predicts that the U.S. Securities and Exchange Commission (SEC) is likely to reject the current batch of Bitcoin ETF applications. The core of Belshe’s apprehension lies in the integration of exchange and custody services within the cryptocurrency industry.
In an interview with Bloomberg, Belshe indicated that the SEC is seeking a distinct separation between these two functions to mitigate the risk of market manipulation. This stance is consistent with the SEC’s history of rejecting over 20 Bitcoin ETF applications. The primary reasons for these rejections have been concerns about potential market manipulation and inadequate customer protection. Belshe specifically highlighted risks associated with Coinbase, a major player in the crypto space and a custody partner for several potential ETFs. He believes that there are unrecognized risks within Coinbase, which could lead the SEC to demand a complete segregation of exchange and custody operations before considering any ETF approvals.
Persistent regulatory hurdles and industry scepticism
Despite some regulated crypto custody providers like Anchorage, BitGo, and Coinbase operating independently from crypto exchanges, the industry continues to debate whether this separation suffices for SEC approval. The skepticism stems from the SEC’s historic hesitance to approve crypto ETFs, even those based on assets traded on regulated exchanges. Belshe’s remarks underline the ongoing regulatory challenges in the crypto market, emphasizing the need for clear guidelines and structures for the approval of innovative financial products like Bitcoin ETFs.
This cautious approach of the SEC resonates with Belshe’s perspective, who underscores the necessity for clarity in regulatory guidelines and structures. Such clarity is fundamental for the approval of new financial products, including spot Bitcoin ETFs. While some industry players remain hopeful, particularly given the recent 45% rally in BTC price since BlackRock filed an application for a spot Bitcoin ETF in June, Belshe’s insights suggest that the path to approval is fraught with regulatory complexities. This ongoing situation highlights the delicate balance that the cryptocurrency industry must navigate between innovation and regulatory compliance, as it seeks broader acceptance and legitimacy in the mainstream financial world.