in a bitcoin spot ETF .. they do not trade in bitcoin... they trade in shares for fiat..
the idea actually is the brokerdealers manage, as agents of the ETF... a basket of SHARES which are sold for fiat
its already been known that the SEC wants to know which btc exchanges will secure, audit and transfer the actual bitcoin (EG coinbase for greyscale/blackrock)
so lets say broker-dealer "ABC investments" wanted to be spot ETF agents..
they would with fiat, go to coinbase. pay $XXXXX fiat for a basket worths of BTC and coinbase would custody it and register the basket with greyscale. making it part of greyscales trust.. not ABC investments property/custody/ownership..
grayscale will then give ABC investments a lump of GBTC shares. where the GTBC shares are ABC investments property/customer/ownership.. which ABC investments can sell shares to its customers
ABC investments would not be trading bitcoin with its customers
im sure the link your wrote got details in wrong order/misunderstood. but im thinking the SEC is talking to coinbase to ensure coinbases systems are ready to register the baskets with blackrock, greyscale, ark.. so that agents can hand fiat over and the ETF hand shares back in a secure audited way via coinbase ratifying, securing and registering the custody of coins to allow ETF to create the shares to give agents access to
it a known think that dealers cant do bitcoin direct with their customers... its kinda the whole entire point of this whole 10 year saga of trying to get an ETF that shadows the spot price. rather than direct trade bitcoin itself.
its just that some applications are not doing what greyscale, blackrock and ark are doing.. some smaller applications have wanted to self custody actual btc and allow direct btc redemptions, which the SEC doesnt want and are saying no to.
the reasons the SEC want it the greyscale,blackrock,ark way.. of a middleman between agent and etf doing the custody. is this:
by a agent not doing "in-kind" share->btc redemption.. and instead SEC wanting just share->cash trading.. is that the trades trigger cap-gains
IF a broker/agent were to take a customers cash. give them shares then later at sell redeem to btc for the customer.. the customer is not then triggering cap-gains because they fiat-share-btc has not looped back to fiat to trigger gains.. its a "in-kind" non taxable swap to not see gains
so yes the sec wants the dealer-agent not to self custody, offer btc, do share->btc redemptions. its for tax reasons
My main reason for bringing it up was ONLY to suggest that the dates for approval might be December 1st at the soonest, and I was not really even caring to get into any of the details of the meaning of what they were doing, even though I presumed that it would have been for various kinds of control and/or manipulation prevention reasons and that sourcing of the coins would be known, and sure maybe there is also the tax monitoring advantages .. whether that was a central motivation or not, we already should have known that self-custody is not part of any the current expectations of any of the ETFs.. so that surely is part of the reason that the ownership of any ETF is inferior to owning spot BTC.. but surely there are going to be both institutions and also some individuals who end up getting into BTC because of the ETF price exposure that is allowable through their retirement savings accounts that would not allow for the direct purchasing and/or custody of BTC.
I suppose many of us have concerns about BIG players owning and controlling so many BTC, even if they have fiduciary duties to the supposed real owners, while we still have a not your keys not your coins situation that could end up having various blow-up scenarios that are bad for the users and perhaps even bad for bitcoin as a whole since some of the direct power of owning and controlling BTC would be held by the custodian who may well not be acting in the interest of the person who believes that he owns bitcoin when he only owns claims to bitcoin...or maybe he ONLY owns bitcoin price exposure..