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Coinbase’s Role in Bitcoin ETF Approval: Potential Hurdles and Market Impact

The prospect of a spot Bitcoin ETF approval holds immense potential for crypto exchange Coinbase, yet their involvement in bridging the crypto market and traditional equities market might lead to regulatory roadblocks. Bloomberg’s Michael P. Regan suggests that Coinbase’s clash with the SEC could potentially stall or complicate the approval process for a spot Bitcoin ETF.

Challenges and Delays

The ongoing discord between the SEC and Coinbase, including a lawsuit last June alleging unregistered roles of exchange, broker-dealer, and clearinghouse, creates a strained relationship. This rift between the institutions could significantly hinder the path to Bitcoin ETF approval, sparking hesitancy or delays from the SEC’s end.

Coinbase’s Advantage Upon Approval

However, if the SEC greenlights Bitcoin ETFs, Coinbase stands to benefit substantially. Regan notes that Coinbase would play a pivotal role in securities operations, providing custody, trading execution, market surveillance, and lending services. Notably, ETF issuers like BlackRock have acknowledged their dependence on Coinbase, referencing the SEC’s case against the platform in their risk disclosures.

Influence on SEC Decision

The historical strain between Coinbase and the SEC might heavily influence the regulator’s forthcoming decision on the Bitcoin ETF approval, potentially posing a challenge to Coinbase’s ambitions in this space.

Analyst Perspectives

Despite uncertainties, analysts largely maintain an optimistic outlook, suggesting potential early approvals. Reports from Fox Business and hints by Bloomberg Intelligence analysts suggest the possibility of ETF approval as soon as this week. The overarching sentiment leans toward anticipating a Bitcoin ETF approval before the January 20, 2024, deadline.

Market Impact and Future Prospects

If Bitcoin ETF trading commences in February or March 2024, sentiments around Bitcoin’s price could pave the way for an extended bullish wave, aligning with the upcoming Bitcoin Halving event in the second quarter of the year. However, uncertainties linger regarding the regulatory landscape and its impact on the market.

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