Coinbase, one of many main cryptocurrency exchanges, has formally responded to the U.S. Securities and Trade Fee (SEC) relating to a proposal for a spot Ethereum exchange-traded fund (ETF). Coinbase Chief Authorized Officer Paul Grewal introduced through social media platform
immediately @coinbase Replied @SECGovRequest feedback on proposal @ Grayscale Ethereum Belief ($ETHE) ETP. 27 pages and 96 citations present (1) authorized, (2) technical, and (3) financial causes for approval. 1/6
— paulgrewal.eth (@iampaulgrewal) February 21, 2024
Ethereum as a commodity classification
The cornerstone of Coinbase’s argument is to categorise ETH as a commodity reasonably than a safety. Grewal’s assertion that “ETH will not be a safety…earlier than and after the merger, the SEC, CFTC, and the market now not seen ETH as a safety, however as a commodity,” underscored the consensus amongst regulators and market contributors relating to Ethereum’s standing. This classification is in line with the authorized framework required by the SEC to contemplate ETH-based ETFs.
Bitcoin ETF approval units precedent
Coinbase cited the SEC’s earlier approval of a Bitcoin ETF as a precedent to advocate for constant regulatory remedy of Ethereum. Grewal believes that “the economics counsel that ETH is as resilient as BTC in assembly the committee’s ETP approval standards,” highlighting the similarities between the robustness and maturity of the ETH and Bitcoin markets. This comparability is meant to remind the SEC of the rationale behind its earlier determination and advocate that ETH take an identical strategy.
Ethereum’s technical and operational safety
The place paper highlights the technical and operational safety mechanisms inherent to the Ethereum blockchain, notably post-merger. The transition to proof-of-stake is taken into account a major enhancement to Ethereum’s security measures, making it much less prone to fraud and manipulation. The robustness of this know-how is a key component of Coinbase’s argument, underscoring the reliability and stability of ETH because the underlying asset of the ETF.
Market Dynamics and Resilience
Coinbase offers an in depth evaluation of Ethereum’s market dynamics, together with its depth, liquidity, and tightness of spreads. Grewal famous that “ETH’s market depth, tightness of spreads, and worth correlations within the spot market are extremely indicative of the market’s resistance to fraud and manipulation.” This argument is meant to guarantee the SEC of ETH’s market stability and its assist ETF’s means to take action with out posing vital dangers to traders.
Surveillance sharing agreements and market surveillance
Lastly, Coinbase highlighted its surveillance-sharing settlement with the Chicago Mercantile Trade (CME) as a mechanism to make sure complete market oversight. As Grewal describes it, the protocol “facilitates data sharing by way of the monitoring of the CME ETH futures market,” which is important to monitoring and stopping fraud and manipulation within the ETH market.
All in all, Coinbase’s SEC submitting is a rigorously constructed argument that mixes authorized precedent, technical safety, and market stability evaluation to argue for approval of a spot Ethereum ETF.
Customary Chartered expects the SEC to approve an Ethereum ETF on Might 23, which might trigger ETH costs to surge to $4,000. Nonetheless, Grayscale ETF head Dave LaValle lately said that there’s solely a 50% probability that the SEC will approve the conversion of its ETH belief right into a spot ETF in Might.
As of press time, ETH is buying and selling at $2,961.
Featured picture created utilizing DALLE, chart from TradingView.com
