Two weeks ago, the Wall Street Journal reported that the U.S. Securities and Exchange Commission (SEC) thought the recent spate of applications for spot bitcoin exchange-traded funds (ETF) were inadequate because they weren’t clear and comprehensive.

The SEC wanted the filings to name the exchange that would carry out the surveillance-sharing agreements (SSA) mentioned in the original filings. These SSAs are supposed to show the SEC that potential bitcoin ETF issuers are able to detect fraud and manipulation in the bitcoin market.

This is an excerpt from The Node newsletter, a daily roundup of the most pivotal crypto news on CoinDesk and beyond. You can subscribe to get the full newsletter here.

The specific addition of an SSA to these applications is widely viewed as the key to finally getting the bitcoin ETF approved in the United States. Some analysts predict an ETF that tracks that spot market value of bitcoin (as opposed to existing futures-based ETFs) would lead to greater institutional adoption of the cryptocurrency.

Many of the applicants reacted quickly to the SEC and all named Coinbase (COIN) as the exchange that would oversee surveillance on the bitcoin market for them and refiled. On its face, a great choice. Coinbase is a publicly traded company and has a far less sketchy reputation than most other crypto exchanges.

But, is Coinbase the right choice? It might not be.

The spot bitcoin ETF has been denied by the SEC multiple times from multiple potential issuers. Previously the SEC stated that those denials were in part due to a lack of something like an SSA. According to those denials, the SEC would want to see an information sharing agreement between the stock exchange the ETF is listed on and a spot bitcoin exchange that is both 1) of significant size and 2) regulated.

On the former point, Coinbase is not the largest spot bitcoin exchange. It currently sees somewhere around 2.5% of global daily trading volume, according to BTC/USD trading pair data from CoinGecko and CoinMarketCap. You can quibble about the details, bitcoin trading exchange volumes could also include trading pairs between many currencies, crypto or otherwise.

And so, the roughly $400 million that represents daily BTC/USD trading on Coinbase is probably adequate to “surveil” the market.

Read more: BlackRock’s Bitcoin ETF Application Takes Surveillance to the Next Level

In honesty though, that’s probably not where the issue will lie. In honesty though, that’s probably not where the issue of the SEC’s approval will lie.

Instead, the SEC will likely approve or deny the recent ETF applications based on its understanding of Coinbase being “regulated.” I’m sure the SEC will be over the moon to find that a firm it’s bickering with in court is the proposed market surveillance provider for the likes of Wall Street giants like BlackRock and Fidelity. The court squabble has nothing to do with the bitcoin market, but still, it’s a consideration.

The thing is: Coinbase’s fit for this role is all a bit unclear.

As my colleague Nik De pointed out in CoinDesk’s “State of Crypto” newsletter, the SEC said in a 2019 order that the bitcoin market had too much potential for manipulation and “there needed to be a ‘surveillance-sharing agreement with a regulated market of significant size relating to the underlying assets’ to deter any potential manipulation.”

There is, unfortunately, no exact definition of a “regulated market” and “significant size.” So yes, it’s unclear.

The bigger point amid all this ETF talk is that Coinbase is not a shoo in as an adequate data provider partner.

The unfortunate truth is that the natural progression of this conversation is going to leak into taking surveillance to the next level via an information-sharing agreement. As CoinDesk’s Ian Allison puts it:

“… what’s more likely to influence the SEC’s decision is an information-sharing deal that flips the position of power in the arrangement and gives regulators the right to demand extra background.”

Now this is different.

An information-sharing deal would allow the SEC to request specific information about an end client’s trading history of the spot bitcoin ETF superseding the surveillance provider telling the regulator that “everything’s a-OK, Captain.”

Critically, an information-sharing agreement could also include personal information such as a customer’s name and address. This may not bode well for privacy advocates in crypto. However, it is also the completely unsurprising end state of bringing a spot bitcoin ETF to market, or perhaps any financialization of crypto.

You wanted a highly regulated bitcoin product? Well, here’s the regulation.