Coinbase entered the fray, responding to the U.S. Securities and Exchange Commission’s (SEC) call for its nod over Grayscale’s Ethereum spot ETF listing application. The application was aimed to transform the Grayscale Ethereum Trust into a Spot ETF with an emphasis that Ethereum (ETH) is not regarded as security by either SEC, CFTC, or the market as well but rather another commodity just like Bitcoin (BTC), thereby aligning itself with the Commission’s requirements for ETP approvals.
According to Paul Grewal, Coinbase’s Chief Legal Officer, who put out this response through his X (Twitter) handle, it comes as a 27-page document having 96 sources referred. The document explains the legal, technical, and economic reasons behind approving the ETP listing for Grayscale Ether Trust.
The letter underscores that regulatory agencies have not labeled it as a security, and it continues to be a commodity before and after Merge. Furthermore, Ethereum’s Proof of Stake (PoS) governance model is explained in the proceeding section, highlighting its robustness in terms of ownership concentration, consensus, liquidity, and governance, which collectively help mitigate potential risks associated with fraud or manipulation.
The economic analysis presented in this letter draws similarities between ETH and BTC, thereby indicating that Ethereum also meets the Commission’s standards for ETP approvals, thus signaling Coinbase’s strong commitment towards promoting innovation and transparency within the crypto sector through well-informed regulatory dialogue and research.
Coinbase’s Perspective
Moreover, the letter answers some fundamental questions asked by the Commission in a detailed manner with data and analysis. First of all, with respect to ETH’s Classifications, Coinbase argues that ETH is considered a commodity under NYSE Arca Rule 8.201–E since it was recognized by CFTC, and regulated acts have confirmed this. Aside from this, the lack of objection to the trading of ETH futures makes it even more clear that it is a commodity.
Secondly, Parallels with Bitcoin ETPs, In addition to other things regarding arguments for listing Bitcoin ETFs, also apply to Ethereum due to its improved security features and decentralized governance. Additionally, manipulation concerns, proposed Trust and Shares are generally seen as safe from manipulation because they will rely on the liquidity and transparency found in the ETH markets.
Furthermore, CME’s Role and commenters concur with the Exchange’s assessment of CME as a significant market for spot ETH, highlighting the correlation between spot and futures markets and the effectiveness of surveillance-sharing agreements in detecting and deterring manipulation.
Nevertheless, Coinbase reiterates that the Ethereum market and its collaboration with CME substantiate the need for adopting the proposed rule change, which is in line with the SEC’s view on spot Bitcoin ETPs; the letter highlights why all crypto-assets should be regulated consistently and an inclusive, transparent financial system is needed.