The US crypto exchange Coinbase has clearly supported Grayscale’s Ether ETF application in a letter to the SEC. As previously happened with the Bitcoin Trust, the asset manager Grayscale also wants to convert its Ethereum Trust (ETHE) into an exchange-traded fund. Coinbase Chief Legal Officer, Paul Grewal, announced on X, the company responded to an SEC request for comment on Grayscale’s ETF application. The 27 pages The letter explains in great detail the legal, technical and economic reasons that speak in favor of approving the Ether ETF.
In the letter published by Grewal, Coinbase also argues that the SEC’s reasons for the Bitcoin ETF approval would have “equal – and in some ways greater – validity to the listing and trading” of a Grayscale Ether ETF. Coinbase names five central arguments and emphasizes, first and foremost, that Ether is rightly classified as a raw material and not as a security. This was shown in particular by the approval of ETH futures by the US Commodity Futures Trading Commission (CFTC), previous statements by SEC officials and various court rulings.
How Coinbase advocates for the ETF
But Coinbase goes even further in its argument. The letter highlights Ether’s proof-of-stake mechanism very positively and points to factors such as the decentralized distribution of ownership and resilience to attempted fraud. Furthermore, the high trading volume, liquidity and tight spreads would indicate the maturity of the asset. Finally, Coinbase emphasizes that by partnering with the Chicago Mercantile Exchange, effective monitoring of the Ether spot market would be possible for increased security.
Some analysts believe that the SEC could approve the first spot Ether ETFs as early as May this year. Grayscale applied to convert its Ethereum trust last October. Other large financial groups such as BlackRock and Fidelity also submitted ETF applications for the second largest cryptocurrency. As happened with Bitcoin, an exchange-traded Ether fund would make access much easier, especially for institutional investors. However, Coinbase is not acting entirely altruistically – the crypto exchange could do big business as a potential custodian of the Ether purchased from ETF issuers.
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