Questions on the odds of Spot ETF approvals arise as Nasdaq goes cold turkey on crypto custody plans

• An analyst has questioned the chances of the SEC approving spot Bitcoin ETF filings after the SEC recorded applicants in the Federal Registry.
• The evaluation follows a move by Nasdaq to pause its plans to offer crypto custody services, citing regulatory fears.
• The move leaves Coinbase without competition as the primary custodian of the ETF spot holdings.  

Spot Bitcoin Exchange-Traded Funds (ETFs) have been a popular talk in the crypto sphere for the past two months, with key institutional players filing applications for consideration by the US Securities and Exchange Commission (SEC). Amid this chatter, Coinbase (COIN) has presented as the choice Surveillance Sharing Agreement (SSA), a popular option among applicants.

Also Read: Traders ask how high heavens could be for Bitcoin price as SEC sets down eight BTC ETF applications.

Possibility of spot BTC approvals on Nasdaq’s hesitation

Nasdaq revealed the decision to suspend its interest in offering crypto custody services. According to company CEO Adena Friedman, there is a "lack of clarity" within the crypto arena, which makes now the wrong time for the revered American stock exchange to venture into the cryptocurrency custody business.

"The odds of spot BTC ETF being approved are not as high as originally thought," are the words of crypto sleuth @tedtalksmacro, who took an interest in the recent move by Nasdaq to pause plans to offer cryptocurrency custody services on the grounds of unfavorable regulatory atmosphere.

Based on the announcement, Nasdaq had long eyed the opportunity before the playing field started to change over the past few months bringing a regulatory cloak into the space. Nasdaq's first expression of interest in cryptocurrency custodianship traces back to September when it alluded to services such as "trading or execution to institutional cryptocurrency asset managers."

The decision to pause the custody services venture does not mean the firm has turned anti-ETF. On the contrary, it maintains partnerships with Coinbase and went as far as resubmitting BlackRock's Bitcoin ETF application to the US SEC. According to a Reuters report, the revised filing contained additional details while addressing the commission's concerns on BlackRock's initial filing.

It is worth noting that Nasdaq was expected to collaborate with Coinbase in offering market surveillance for BlackRock's ETF, among others. The double force came amid the crypto industry trying to rehabilitate its perception among community members after a FUD-infused 2022.

With the custody services suspension, Coinbase remains a singular player in the field, fueling speculation of a possible rejection by the SEC.

The speculation sprouts from the fact that Nasdaq had previously touted itself as a central player in the ongoing race for spot BTC EFT approvals, citing the need to join the crypto space. Accordingly, some market players attribute the move to a categorical resolve not to compete with Coinbase, who have already been championed as the main custodians of the Spot BTC ETFs they intend to list.

It is worth mentioning that crypto custody does not feature among Nasdaq's core competencies, and owing to the fact that Coinbase was the ideal choice for almost all the applicants, Nasdaq may have considered it unfeasible to run the custodian race as majority rules.

SEC Chair questions Coinbase's capabilities as an SSA

As a side note, SEC chair Gary Gensler had raised concerns over the capabilities of Coinbase to serve as an effective Survilance Sharing Agreement (SSA) to keep the SEC informed over the spot BTC operations. An SSA is an arrangement between crypto firms and regulators or market surveillance providers like the SEC, enhancing the crypto market's integrity and transparency by sharing trading data and information. 

According to Gensler, Coinbase, among other exchanges, operated "conflicting activities" despite having "limited monitoring."

In the latest development, however, the commission has recorded eight applicants in the Federal Reserve's registry, featuring BlackRock, Fidelity, BitWise, WidsomTree, VanEck, Invesco, Proshares, and Valkyrie.

The move is speculated to be the first step in the agency's process to begin reviewing the filings. The FXStreet team will bring you updates. 

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