Coinbase, the American cryptocurrency exchange, has expressed strong support for Grayscale’s initiative to transform its Ethereum Trust into a spot exchange-traded fund (ETF). The company’s Chief Legal Officer, Paul Grewal, submitted a comprehensive 27-page document to the Securities and Exchange Commission (SEC) outlining the legal, technical, and economic justifications for approving an Ethereum-based ETF.
Ethereum: Commodity or Security?
Coinbase’s submission included several key points, with the central argument being Ethereum’s classification as a commodity—a standpoint corroborated by the Commodity Futures Trading Commission’s approval of Ethereum futures, public statements from SEC representatives, and judiciary decisions. Coinbase highlighted that both before and after Ethereum’s network upgrade, known as the merger, it has been consistently treated as a commodity by regulatory agencies and markets.
Ethereum ETF: A Case for Market Maturity
Additionally, Coinbase presented arguments supporting the maturity and efficiency of the Ethereum market, noting its widespread ownership, high trading volume, liquidity, and narrow bid-ask spreads. These factors, according to Coinbase, are indicative of an efficient market ripe for an ETF. In a comparative analysis, Coinbase argued that reasons for approving Bitcoin spot ETFs apply equally to Ethereum ETFs.
Coinbase maintained that the approval of Ethereum futures ETFs set a precedent that should logically extend to spot-based Ethereum ETFs due to their close correlation. The exchange also emphasized the robust security features of the Ethereum blockchain, which mitigate the risk of fraud and market manipulation. It further detailed its own advanced market surveillance systems and collaboration with the CME to monitor its trading platform.
The push for an Ethereum ETF comes as NYSE Arca has proposed rule changes to list and trade Grayscale Ethereum Trust (ETHE) shares as an ETF, a move that is currently under public review pending the SEC’s final decision.