5 Arguments For A Spot Ethereum ETF

Coinbase, one of many main cryptocurrency exchanges, has formally responded to the Securities and Change Fee (SEC) concerning the proposal for a spot Ethereum Change-Traded Fund (ETF). Paul Grewal, Coinbase’s Chief Authorized Officer, introduced by means of social media platform X that the corporate submitted a complete 27-page response, full with 96 citations, to advocate for the approval of the proposed Grayscale Ether Belief (ETHE) ETP.

As we speak @coinbase responded to @SECGov’s request for touch upon the proposed @Grayscale Ether Belief ($ETHE) ETP. 27 pages and 96 citations that present the (1) authorized, (2) technical, and (3) financial rationale for approval. 1/6

— paulgrewal.eth (@iampaulgrewal) February 21, 2024

Ethereum’s Classification As A Commodity

The cornerstone of Coinbase’s argument rests on the classification of ETH as a commodity somewhat than a safety. Grewal’s articulation, “ETH is just not a safety…earlier than and after the Merge, the SEC, the CFTC, and the market have handled ETH not as a safety however a commodity,” underscores the consensus amongst regulatory our bodies and market contributors concerning Ethereum’s standing. This classification aligns with the authorized framework essential for the SEC to contemplate an ETF primarily based on ETH.

Precedent Set By Bitcoin ETF Approvals

Coinbase leverages the SEC’s prior approval of Bitcoin ETFs as a precedent, advocating for constant regulatory remedy for Ethereum. Grewal posits, “The economics present that ETH is as resilient as BTC in satisfying the Fee’s commonplace for ETP approvals,” highlighting the parallel between Ether’s and Bitcoin’s market robustness and maturity. This comparability serves to remind the SEC of the rationale behind its earlier selections and suggests an identical strategy for ETH.

Technological And Operational Safety Of Ethereum

The submission emphasizes the technological and operational safety mechanisms inherent in Ethereum’s blockchain, significantly post-Merge. The transition to Proof of Stake is introduced as a major enhancement to Ethereum’s safety features, lowering its susceptibility to fraud and manipulation. This technological robustness is a vital consider Coinbase’s argument, underscoring the reliability and stability of ETH as an underlying asset for an ETF.

Market Dynamics And Resilience

Coinbase presents an in depth evaluation of Ethereum’s market dynamics, together with its depth, liquidity, and the tightness of spreads. Grewal notes, “ETH’s market depth, tightness of spreads, and value correlation throughout spot markets are extremely indicative of a market resilient to fraud and manipulation.” This argument is designed to guarantee the SEC of ETH’s market stability and its capability to assist an ETF with out introducing important dangers to buyers.

Surveillance-Sharing Settlement And Market Oversight

Lastly, Coinbase highlights the surveillance-sharing settlement with the Chicago Mercantile Change (CME) as a mechanism for guaranteeing complete market oversight. This settlement, as described by Grewal, “facilitates the sharing of data…by means of its surveillance of the CME ETH futures market,” which is essential for monitoring and stopping fraudulent and manipulative practices within the ETH market.

In conclusion, Coinbase’s submission to the SEC is a rigorously constructed argument that mixes authorized precedent, technical safety, and market stability analyzes to advocate for the approval of a spot Ethereum ETF.

Commonplace Chartered predicts SEC approval for an Ethereum ETF by Could 23, doubtlessly inflicting a value surge to $4,000 for ETH. Nonetheless, Dave LaValle, head of Grayscale ETFs, just lately mentioned there’s solely a 50% probability that the SEC will approve the conversion of its ETH belief right into a spot ETF in Could.

At press time, ETH traded at $2,961.

Featured picture created with DALLE, chart from TradingView.com