As we all know by now, BlackRock – which is trying to bring a bitcoin-based exchange-traded fund (ETF) to fruition – has partnered with Coinbase in its application as a means of creating a safe custody haven for users. However, some analysts believe this move is going to come back and bite the company in the rear.
Should BlackRock Find a Replacement for Coinbase?
Coinbase is currently being sued by the Securities and Exchange Commission (SEC), the financial agency that’s tasked with approving (or disapproving) the ETF application from BlackRock. The agency is suing Coinbase because it allegedly has been serving as an unregistered exchange broker for many years, and it’s likely the SEC is not going to be keen on giving the greenlight to an application that lists a company it deems an enemy in the “partner” section.
The SEC has also been denying such applications for many years, and there are several traders and analysts out there that think BlackRock – given its status as a standard financial company – will somehow ease the grid between trad fi and crypto in that it holds a solid record with the SEC. Thus far, the firm has had more than 500 applications greenlit.
So naturally, individuals are worried the SEC could just resort to its usual tricks of denying any forward-moving tactics and thus say “no” outright due to its present stance regarding Coinbase. John Reed Stark – former chief of the SEC’s Office of Internet Enforcement – said in a recent interview:
I don’t think it’s necessarily a badge of honor to say that you’re using an entity that the SEC is suing as providing you with critical investor protection services. The whole point of the SEC’s lawsuit is that there’s no transparency into what Coinbase does.
Joseph Silvia – a lawyer with the firm Dickinson Wright – appeared to agree with this sentiment. In a statement, he said that the matter of Coinbase partnering with BlackRock is wholly separate from what the SEC is dealing with, and thus it should be treated as separate. However, he doesn’t think the SEC has what it takes to do this. He stated:
Ultimately, it’s going to be Gensler who’s going to make the decision as to whether or not the litigation is going to affect the application.
Not Likely to Move Forward?
Richard Marshall – a partner at law firm Katten – also threw his two cents into the mix, stating:
The statements that Gensler has made don’t give me any sense that he’s going to be flexible. I don’t see that the SEC is going to open the gates.
Coinbase executives said they were surprised when the SEC announced it was acting against the firm on account that they had allegedly met with representatives several times over nine years to ensure they were compliant.
