After Bitcoin, now time for Ethereum. While the success of spot Bitcoin ETFs does not weaken a little over a month after their launch, Wall Street already has another idea in mind and all eyes are now on the second largest capitalization on the market: Ethereum. The protagonists of this new episode are essentially the same and we obviously find BlackRock, Grayscale or even Ark Invest, but there is also Franklin Templeton who would like his share of the pie.
Everyone is currently hanging on the decision of the SEC which continues to examine the feasibility of such a project while one company tirelessly continues its lobbying work in the media and with political staff to speed things up: Coinbase . Its legal director, Paul Grewal, has just published an open letter addressed to the secretary of the Securities and Exchange Commission (SEC) where he sets out the 5 (good) reasons to approve these Ethereum spot ETFs. Here they are summarized for you.
Ethereum is a commodity according to Coinbase
The first argument put forward by Brian Armstrong’s teams alludes to the very nature of Ethereum which is, for them, a raw material. Futures contracts already approved by the Commodity Futures Trading Commission (CFTC) are clear proof of this, as are certain recent court decisions. Finally, regarding this specific point, the DRY not having openly opposed his positions, Coinbase considers it a form of tacit recognition of this nature.
The second argument is purely technical and draws a parallel between the approval of spot Bitcoin ETFs and the hesitation around those concerning ETH. For Paul Grewal, there is no valid reason to accept some and reject others. Furthermore, by already accepting that there are futures contracts on Ethereum, rejecting spot contracts would not make much sense to the SEC as these products have close correlations. Logic.
The market around ETH is viable, strong and mature enough for spot ETFs
This 27-page document then discusses the market strength in question and the mechanisms that guarantee its security. In this regard, we can read that the technological and operational security mechanisms inherent in the Ethereum blockchain “significantly limit the vulnerability of ETH to fraud and manipulation”. In the same vein, the fourth argument will give pride of place to the very structure of the market by detailing its intrinsic qualities.
Depth, tight spreads and price correlation across all spot markets are thus strong arguments in favor of a market resilient to fraud and manipulation. Again. Finally, the fifth and final point addresses the monitoring of the potential market for ETH ETFs by the Chicago Mercantile Exchange (CME) which, with its historical experience, will keep an eye on things and prevent any future fraud.
Beyond this pro ETF Ethereum pleading, the letter signed by Paul Grewal is also a response to the questions asked by the SEC as part of a rule modification recently initiated by the NYSE Arca. It is, in fact, this subsidiary of the New York Stock Exchange which requested to convert the shares of the Grayscale Ethereum Trust into an Ethereum ETF. The regulator had asked on this occasion that professionals in the sector make comments, Coinbase was therefore the first to draw.