Grayscale and Coinbase Meet with SEC Regarding Spot Ethereum ETF
Mitchell Nixon
Cryptocurrency companies Grayscale and Coinbase recently held discussions with officials from the United States Securities and Exchange Commission (SEC) regarding a proposed rule change for the introduction of exchange-traded funds (ETFs) focused on spot ETH.
Grayscale aims to transform its Ethereum Trust, which monitors the market price of Ethereum (ETH) into an ETF. This move mirrors the earlier conversion of its Bitcoin Trust into an ETF in January.
The meeting, conducted on March 6, took place after the conclusion of the commenting period for the proposal and addressed concerns related to potential market manipulation if the fund receives approval.
As per information presented by the SEC, Coinbase contended that the rationale supporting the approval of Bitcoin ETFs should similarly be extended to Ether, given the token has “mechanisms that significantly limit ETH’s susceptibility to fraud and manipulation.”
Another key aspect highlighted in the presentation is Coinbase’s surveillance-sharing agreement with the Chicago Mercantile Exchange (CME), which was initially implemented for Bitcoin ETFs at the SEC’s request to enhance trading oversight.
Coinbase underscored the parallelism between Ether futures and spot markets, akin to the dynamics observed in the Bitcoin market, as pointed out by Nate Geraci of ETF Store on X. He added, “add-in that SEC approved CME-traded Ether futures ETFs and I’m not sure what grounds for disapproval of spot Ether ETFs would be.”
Grayscale is also putting forth a second ETF focused on Ether futures trading. The primary distinction between spot and futures markets lies in the immediacy of asset trading in the spot market, while the futures market involves contracts for buying or selling assets at a predetermined price on a future date.
Certain analysts have proposed the idea that Grayscale could be employing its futures ETF application as a strategic manoeuvre, acting as a “trojan horse” to influence the SEC’s approval of its spot Ether ETF.
Numerous asset management firms, such as Invesco, Galaxy Digital, Fidelity, Franklin Templeton, and BlackRock, are actively pursuing approval for a spot Ether ETF. The SEC is anticipated to make final decisions by May.
Eric Balchunas from Bloomberg suggests that asset managers remain uncertain about regulatory perspectives on the cryptocurrency investment vehicle: “Normally I’d say this was a good sign but as far as I know the Staff has not given any comments yet to the issuers, which is not a good sign as we past when they gave comments on BTC ETFs,” Balchunas stated.