Coinbase urges SEC to approve listing of Grayscale's proposed spot ether ETF

Markets • February 21, 2024, 6:46PM EST

Published 1 minute earlier on

Quick Take

Coinbase’s Chief Legal Officer, Paul Grewal, announced on X that the company has replied to a Securities and Exchange Commission request for comment, asking for the approval of the Grayscale Ethereum Trust listing.
Grayscale has requested converting the trust into a spot ether ETF.

Coinbase has urged the Securities and Exchange Commission's to list the Grayscale Ethereum ETH -1.061% trust for trading, according to the company's chief legal officer Paul Grewal.

Taking to the social media platform X, Grewal announced Coinbase had responded to the SEC's request for comment. He said Coinbase had provided the "legal, technical, and economic rationale" needed for approval.

"Our letter lays out what anyone knows who's paid even the slightest bit of attention to the subject: ETH is not a security. In fact, before and after the Merge, the SEC, the CFTC, and the market have treated ETH not as a security but a commodity," Grewal said in his post.

Analysts have predicted that the SEC will approve spot ether ETFs as early as May of this year. Last October, Grayscale and NYSE Arca filed to convert the Grayscale Ethereum trust to a spot ether ETF. Several firms, including giants like BlackRock and Fidelity, have also filed for spot ether ETFs. Some among those applicants are also aiming to generate additional yield by staking the underlying ether.

Investing in spot ether ETFs would allow investors to wager on the price of the second-largest cryptocurrency by market cap without having to purchase the underlying asset themselves.

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Spot ether ETFs should be approved

In a letter Grewal posted to X, Coinbase made the argument that the SEC's approval of spot bitcoin ETFs "applies with equal – and in some ways greater – force for listing and trading" Grayscale's spot ether ETF.

"ETH’s market depth, tightness of spreads, and price correlation across spot markets are highly indicative of a market resilient to fraud and manipulation," Coinbase said in its letter to the regulator. "ETH’s notional dollar trading volume is significantly greater than the vast majority of the stocks that comprise the S&P 500, including when adjusted for aggregate market value."

The approval of spot ether ETFs could significantly benefit Coinbase's custodial business.

"Coinbase acts as a custodian in eight of the 11 recently approved U.S. bitcoin ETFs and is named as a staking institution by three of the four largest ether staking ETFs outside the U.S.," S&P Global Ratings analysts Andrew O'Neill and Alexandre Birry said in a report published Tuesday.

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About Author

RT Watson is a senior reporter at The Block who covers a wide array of topics including U.S.-based companies, blockchain gaming and NFTs. Formerly covered entertainment at The Wall Street Journal, where he wrote about Disney, Netflix, Warner Bros. and the creator economy while focusing primarily on technological disruption across media. Previous to that he covered corporate, economic and political news in Brazil while at Bloomberg. RT has interviewed a diverse cast of characters including CEOs, media moguls, top influencers, politicians, blue-collar workers, drug traffickers and convicted criminals. Holds a master's degree in Digital Sociology.