BitGo CEO expects further complications before a Bitcoin ETF can hit the market

In a recent interview with Bloomberg TV, BitGo CEO Mike Belshe expressed a cautious stance on the approval of Bitcoin spot exchange-traded funds (ETFs) by the US SEC.

Belshe’s optimism regarding the potential approval of a spot Bitcoin ETF was accompanied by a dose of realism, indicating that the path to approval may encounter additional obstacles.

He said he was optimistic, but the likelihood of further rejections is high despite positive developments in discussions between ETF applicants and the SEC.

Market structure issues

The main concern highlighted by Belshe is market structure issues, particularly the SEC’s insistence on the separation of exchange and custodial roles. This issue has been controversial in various applications, especially those involving Coinbase custody.

Belshe noted that the SEC’s focus on market structure is not without precedent, citing the existing separation between exchanges and custody in other markets like the CFTC Market Structure and Stock Exchanges. ‘actions. He also suggested that aligning with this separation model would benefit the crypto market.

According to Belshe:

“Gary Gensler did not hide this point, we must separate exchanges from guarding.”

Potential rejection of ETF applications could hinge on the SEC’s concern that the exchange and custody functions are not sufficiently separated. Belshe specifically highlighted the risks associated with Coinbase, a custodial partner chosen by most ETF applicants.

Belshe believes the SEC will require a complete separation of these functions before approving applications.

Market optimism

Analysts estimate there is a 90% chance the ETF will be approved in January 2024, but Belshe’s remarks indicate that rejection remains a real possibility.

The SEC has consistently rejected ETF applications, citing concerns about potential market manipulation and insufficient customer protection. However, the plaintiffs argued that the regulator’s concerns were unfounded given its approval of Bitcoin futures ETFs.

The BitGo CEO also drew parallels between Coinbase’s approach and the unsuccessful strategy of its bankrupt competitor, FTX. Belshe referenced Sam Bankman-Fried’s advocacy in Washington, D.C., for a centralized regulatory framework, a model that was met with skepticism after the collapse of FTX.

Anticipation of a spot Bitcoin ETF has been a driving force behind Bitcoin’s recent price rally, with the crypto community closely monitoring the SEC’s decisions.

Bitcoin is up about 45% since BlackRock filed for its ETF and is currently trading at $36,450 after hitting a high of $38,000 earlier in the week.