How Crypto Exchanges Working With Nasdaq Could Pave the Way for Bitcoin ETFs


According to Forbes, seven crypto exchanges have been approved by Nasdaq to utilize their surveillance and transaction monitoring technologies.

The growing number of crypto trading platforms moving toward adopting the infrastructure used by major stock exchanges such as Nasdaq could increase the probability of the approval of a Bitcoin exchange-traded fund (ETF).

Why a Bitcoin ETF is Related to Crypto Exchanges

In July, the Winklevoss twins, who oversee the operations at a strictly regulated U.S.-based crypto exchange Gemini, had their Bitcoin ETF proposal rejected by the U.S. Securities and Exchange Commission (SEC).

In the following months, the SEC went onto reject eight Bitcoin ETFs filed by three institutions.

The Winklevoss Bitcoin ETF primarily relied on exchanges to calculate the accurate price of Bitcoin. The eight ETFs that were rejected later that year were dependent on the Bitcoin futures market.

The SEC stated that the crypto exchange market is vulnerable to manipulation and is not big enough to handle an ETF. The SEC similarly said that the Bitcoin futures market is not of a significant size to support an ETF.

While VanEck and Bitwise are working on ETFs that use a price index to consider exchanges, futures markets, and over-the-counter (OTC) markets, unless the manipulation and surveillance concerns of the SEC are properly addressed, even indexes could have a low probability of being approved.

Cryptocurrency exchanges cooperating with major stock exchanges that are trusted by the U.S. authorities with decades of track record could significantly improve the internal management and surveillance systems that are currently employed by exchanges, which could serve as evidence to the SEC that the infrastructure of the crypto exchange market is strengthening.

As of January, a Nasdaq representative told Forbes that Gemini and SBI Virtual Currency are in the process of implementing Nasdaq’s technology, and five other exchanges have passed the criteria established by Nasdaq.

Photo by Meriç Dağlı on Unsplash

Tony Sio, a Nasdaq surveillance division executive, said:

“Historically, we don’t do such a large vetting process for our clients because they are much more well-known. But as we started working with less well-known names, startups, then we realized we needed to do this check process.”

SEC’s Concerns in Overseas Markets are Also Being Addressed

In February of last year, Gopax, a cryptocurrency exchange in South Korea financed by the country’s second largest commercial bank Shinhan, said that it has implemented Nasdaq and CME Group’s Order Matching System (OMS) to prevent technical problems and downtime.

This month, Bithumb, Coinone, UPbit, and Korbit created an alliance to tackle money laundering and the use of cryptocurrencies in criminal operations.

The SEC’s main concerns including manipulation, lack of regulation in overseas markets, and the low liquidity of exchanges are being addressed and over time, it could meet the demand of the SEC.

Based on the progress shown by cryptocurrency exchanges in Japan and South Korea specifically, overseas regulations have noticeably improved.

With institutions like VanEck and Bitwise working with the SEC staff to solve problems pertaining to Bitcoin ETFs and exchanges actively tightening their internal management systems, over time, it may lead to an increase in the probability of the approval of a Bitcoin ETF.

Previously, Matt Hougan, the global head of research at Bitwise, which filed an ETF this month, said that the company is working with the SEC to address the issues the commission has laid out.

“The SEC has asked thoughtful and relevant questions about the quality of the crypto trading ecosystem, the reliability of crypto pricing, the strength of the arbitrage function in crypto and the robustness of crypto custody. We have spent the past year researching these questions and look forward to discussing those findings with the SEC staff in connection with the filing and listing application,” Hougan said.


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Joseph Y

Joseph Yung is a financial analyst and investor who has worked in the cryptocurrency and technology sector since 2013. He's worked with leading publications within the cryptocurrency space, providing unique insights, interviews, market analysis, and technology coverage. You can contact Joseph at j@cryptomenow.com

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