In a interview between Elliot Johnson of Evolve ETFs, a Canadian investment firm that manages the EBIT-spot Bitcoin ETF, and Joe Carlasare, a commercial litigator supporting Bitcoin, Johnson commented on what he considers key to BlackRock’s potential success in getting his Bitcoin ETF – his surveillance deal.
Surveillance Sharing Agreement
While discussing the constraints within which regulators operate, Johnson touched on the topic of BlackRock’s filing. The distinguishing aspect of their filing, he explained, is the oversight agreement between Coinbase and NASDAQ. This agreement allows regulators to scrutinize Bitcoin transactions, providing the required oversight and integrity to the market.
Johnson explained,
“The rules state the need to supervise a venue of significant size, where the underlying assets you will hold in your ETF are traded. Significant size – Coinbase ticks that box. The monitoring mechanism is through NASDAQ’s existing technology.”
This oversight agreement is one element that could give BlackRock an edge in the ETF approval process. However, Cathie Wood’s recent 21Shares mock Bitcoin ETF filing amendment added a similar “surveillance-sharing agreement” to her filing, originally filed in April.
So while this appears to be an attempt to outsmart Blackrock, Johnson’s insight confirms Cathie Wood’s analysis and bullish sentiment to finally get a spot Bitcoin ETF approved.
ETF approval struggles
Johnson also mentioned how the SEC views Bitcoin as a commodity, not a security. The existence of a major exchange like Coinbase providing trading data to NASDAQ strengthens the case for BlackRock’s Bitcoin ETF approval.
For years, the US Securities and Exchange Commission (SEC) has refrained from approving Bitcoin ETFs due to concerns about the oversight and possible manipulation of the underlying spot market where most Bitcoin volume is traded, often outside the US. However, the distinction between the futures market and the spot market has been a constant point of debate.
In the interview, Johnson explained the importance of a transparent and regulated index, citing CF benchmarks as an example. The index it uses is highly regulated, eliminating price manipulation and ensuring a fair, efficient price. This feature is essential for a Bitcoin ETF to function properly and suggests a possible reason why BlackRock could be successful.
“The quality of that index allows BlackRock to do what we do every day, which is trade over-the-counter for their Bitcoin at that price and have no slippages,” Johnson noted.
The introduction of BlackRock’s Bitcoin ETF, which features a strong surveillance mechanism, could serve as a turning point in the cryptocurrency space. Johnson predicts that with the possible approval of BlackRock’s Bitcoin ETF, professional investors will see Bitcoin as a necessary asset in their portfolios.
Reflecting on his own journey, Johnson projected an optimistic future where Bitcoin merges with existing financial infrastructures. “I believe the future will be one where we have a combination of the existing industrial infrastructure…along with Bitcoin as now a major asset within that infrastructure,” he explained.
Johnson referenced the significant shift in investor sentiment since 2017 when discussing how Bitcoin could pose a career risk. However, in 2021 he noted, “Investors told us, ‘I need to know more about Bitcoin. There is too much career risk for me to ignore Bitcoin.’”
Soon, he predicted, investors would view not owning Bitcoin itself as “too much career risk”.
