Coinbase, a leading cryptocurrency exchange, has expressed its support for Grayscale’s bid to transform its Ethereum Trust into a spot Ether exchange-traded product (ETP), urging the SEC to grant approval. One of Coinbase’s primary arguments revolves around the classification of Ether as a commodity rather than a security.
Coinbase’s Chief Legal Officer shared a detailed 27-page letter with the SEC, outlining the legal, technical, and economic reasoning behind the approval of an Ether-based ETP.
The cryptocurrency community anticipates the SEC’s approval of a spot Ether ETF by May, following Grayscale and NYSE Arca’s application in October 2023. Coinbase highlighted various factors in its argument, including Ether’s classification as a commodity by the Commodity Futures Trading Commission, statements from SEC officials, and court rulings supporting this classification.
Additionally, Coinbase emphasized Ethereum’s Proof-of-Stake consensus mechanism as evidence of its robust governance characteristics, mitigating risks of fraud and manipulation. The exchange also drew parallels between spot Bitcoin ETF approvals and the potential listing of Grayscale’s spot Ether ETFs, emphasizing the efficiency and maturity of the Ethereum market.
Furthermore, Coinbase underscored the technological and operational security measures inherent in the Ethereum blockchain, reducing Ether’s vulnerability to fraudulent activities or market manipulation. The exchange’s sophisticated market surveillance capabilities and collaboration with the Chicago Mercantile Exchange were also highlighted.
However, concerns raised by S&P analysts regarding the introduction of new concentration risks with spot Ethereum ETFs, particularly those involving staking, were acknowledged. While institutional participation in staking could diversify validators in the Ethereum network, it may also introduce new concentration risks if a single entity dominates staking activities within these ETFs.
