Coinbase Argues for Approval of Ether ETF in Letter to SEC
Crypto exchange Coinbase has submitted a strongly-worded letter to the Securities and Exchange Commission (SEC) advocating for the approval of a spot Ether exchange-traded fund (ETF). The letter was filed in response to a proposal by NYSE Arca to list and trade shares of the Grayscale Ethereum Trust as an Ethereum ETP.
Key Points:
- Coinbase argues that Ether should be classified as a commodity, not a security, citing the CFTC’s regulation of Ether futures, court rulings, and the SEC’s lack of objection.
- The company highlights Ethereum’s proof-of-stake governance as a mitigating factor against fraud and manipulation.
- Coinbase asserts that the SEC’s approval of Bitcoin ETFs should apply equally or even more strongly to Ether ETFs.
- Analysts caution that Ether ETFs allowing staking could lead to concentration risk among validators.
- Coinbase emphasizes Ethereum’s market depth, tight spreads, and price correlation as indicators of its resilience.
Coinbase’s main argument is that Ether should be considered a commodity, drawing attention to the CFTC’s regulation of Ether futures, court rulings confirming its non-security status, and the SEC’s lack of objection. They assert that if the SEC approves spot Bitcoin ETFs, it should do the same for an Ethereum ETP. Coinbase also highlights Ethereum’s mature market conditions, including market depth, tight spreads, and price correlation with other assets.
Analysts caution that allowing staking in Ether ETFs may introduce concentration risk among validators. If a single custodian handles staking for multiple ETFs, it could lead to centralization on top validation protocols like Lido. Coinbase argues for the approval of Ether ETFs, while analysts stress the need to carefully evaluate the staking mechanisms to prevent over-centralization.
Hot Take: Coinbase Makes a Strong Case for Ether ETF Approval
In its letter to the SEC, Coinbase presents a compelling argument for the approval of a spot Ether ETF. The company asserts that Ether should be classified as a commodity, highlighting regulatory precedents and Ethereum’s market resilience. However, analysts caution against potential concentration risks associated with staking in Ether ETFs. The SEC will need to carefully consider these factors when making its decision on an Ether ETF.
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