By Michael P. Regan January 4, 2024 at 4:00 PM CST You're reading the Bloomberg Crypto newsletter. Get exclusive coverage of the crypto universe delivered straight to your inbox twice a week. By submitting, I agree to the Privacy Policy and Terms of Service, and to receive offers and promotions from Bloomberg. 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. The SEC and Coinbase 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. Source: @brian_armstrong Meanwhile, according to the prospectuses of wannabe spot-Bitcoin ETF issuers, Coinbase will be a central component of how these securities operate, providing multiple key roles including custody, trading execution, market surveillance and even lending. While the SEC’s case against Coinbase doesn’t revolve around Bitcoin itself or custody of the original cryptocurrency, ETF issuers including BlackRock have acknowledged they are dependent on Coinbase and have flagged the SEC’s case against the crypto platform in their risk disclosures. "Through Coinbase Prime, we aim to provide a secure and comprehensive environment for the world's largest institutional clients,” a spokesperson for Coinbase said in an email, when asked about whether the SEC’s lawsuit will affect its role as a service provider to ETF issuers. “We have extensively prepared for ETF approval -- we are the service provider of choice precisely because of the resiliency of our products and our robust track record." A representative for the SEC didn't return a request for comment. But, oh, to be a fly on the wall in Washington and hear what the regulators think about a company that they’re poised to battle in court playing such a huge role in facilitating the trading of securities they’ve being asked to approve. Counting it out $697,000,000 Value of crypto positions liquidated after a market flash crash, according to Coinglass Hearing them out “The spot market is still a little, let’s call it, weird. FTX, Binance, stuff, things, shaggy hair guy in the news.” Simeon Hyman Global Investment Strategist at ProShares In a discussion on Bloomberg TV about a potential spot-Bitcoin ETF and its impact on futures market What we’re reading (and writing) Citi Alumni Plan Bitcoin Securities That Don’t Need SEC Approval Nigeria Slaps Strict Rules on Banks After Lifting Crypto Ban JPMorgan, Goldman in Talks With Grayscale About Bitcoin ETF Role Total Value Locked Across DeFi Protocols Has Surged to Levels Last Seen Before the Collapse of FTX (The Block) Chief Executive of Collapsed Crypto Fund Hyperverse Does Not Appear to Exist (The Guardian) What we’re watching Bitcoin ETF Is Fully Priced In: Glen Goodman Get Bloomberg newsletters in your inbox Tech Daily for what to know in tech Cyber Bulletin for coverage of the shadow world of hackers and cyber-espionage The Brink for exclusive coverage of corporate distress, bankruptcies and turnaround stories Game On for a playthrough of the video game business And sign up for more Bloomberg newsletters at Bloomberg.com. — With assistance from Yueqi Yang, Olga Kharif, Emily Nicolle, and Allyson Versprille https://www.bloomberg.com/news/news...utm_campaign=socialflow-organic&sref=wgRWWeJL