Coinbase has put out five reasons why the SEC should allow Ethereum ETFs.
Grayscale has applied to convert its Ethereum Trust into spot Ether ETP, and the biggest cryptocurrency exchange in the US by trading volume, Coinbase, has encouraged the SEC to accept the conversion.
This follows the securities regulator’s decision on January 25 to delay its review of Grayscale’s Ether ETF until March 10. In light of the impending second deadline, Coinbase’s top legal officer laid forth the technological, economic, and legal reasons for the exchange’s approval of Grayscale’s fund on February 22.
One of the five main points made by Coinbase in their letter to the SEC in support of a spot Ether ETF was that the market views Ethereum more as a commodity than a security. Grewal posted this letter in an X (Twitter) post.
“In our letter, we state the obvious: Ethereum is not a security. This is something that everyone paying attention to the topic understands. The market, the SEC, and the CFTC have consistently seen ETH as a commodity rather than a security, both before and after the merger,” Grewal said.
In the letter, Coinbase said that the SEC’s “arguments in favor of listing and trading Bitcoin ETPs apply with equal—and in some ways more—force for listing and trading” than the Ether ETP by Grayscale.
Coinbase presented a third argument in response to worries about market manipulation. They said that the Ethereum market “benefits from extremely high depth and liquidity” and that the asset is less vulnerable to manipulation because of its large market value of over $315 billion.
In addition, the exchange made note in its fourth argument that the futures market at the Chicago Mercantile Exchange (CME) “represents a regulated market of sufficient scale relating to ETH futures,” which provides the ability to identify attempts at manipulating spot ETH.
The last point of the letter argued that the SEC should “reasonably arrive at one conclusion” that an ETP using CME ETH futures is fundamentally the same as an ETP using spotETH. According to Coinbase, the decision to allow Ethereum futures ETPs but reject an Ethereum spot ETP is “arbitrary and capricious” because of this.
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