Coinbase, a leading cryptocurrency exchange, has recently made a compelling case to the Securities and Exchange Commission (SEC) for the listing of the Grayscale Ethereum Trust. This move was publicly announced by Paul Grewal, the Chief Legal Officer of Coinbase, on a popular social media platform.
In a detailed response to the SEC’s request for comments, Coinbase presented a comprehensive argument encompassing legal, technical, and economic perspectives to justify the approval. Grewal emphasized that Ethereum (ETH), both pre and post-Merge, is not a security but a commodity, a view shared by the SEC, the Commodity Futures Trading Commission (CFTC), and the broader market.
The Potential Impact of Spot Ether ETFs on the Crypto Market
Industry analysts predict that the SEC could greenlight spot ether Exchange Traded Funds (ETFs) as early as May this year. This follows Grayscale and NYSE Arca’s filing last October to convert the Grayscale Ethereum Trust into a spot ether ETF. Several other firms, including industry giants BlackRock and Fidelity, have also submitted applications for spot ether ETFs, with some intending to earn additional yield through staking the underlying ether.
Investing in spot ether ETFs offers investors the opportunity to speculate on the price of the world’s second-largest cryptocurrency without the need to buy the underlying asset directly.
Coinbase argues that the SEC’s approval of spot bitcoin ETFs should logically extend to Grayscale’s spot ether ETF. They highlight that Ethereum’s market depth, spread tightness, and price correlation across spot markets indicate a market resilient to fraud and manipulation. Furthermore, Ethereum’s notional dollar trading volume surpasses most of the stocks in the S&P 500, even when adjusted for aggregate market value.
The approval of spot ether ETFs could significantly boost Coinbase’s custodial business. As S&P Global Ratings analysts Andrew O’Neill and Alexandre Birry noted in a recent report, “Coinbase acts as a custodian in eight of the 11 recently approved U.S. bitcoin ETFs and is named as a staking institution by three of the four largest ether staking ETFs outside the U.S.”
This development could potentially reshape the landscape of crypto trading, offering investors more options and flexibility while reinforcing the legitimacy of cryptocurrencies in the financial market.
