In a 27-page response to the SEC’s request for comments on the proposed Grayscale Ether Trust (ETHE) Exchange-Traded Product (ETP), Coinbase has outlined the legal, technical, and economic rationale for the approval of the ETP.
Providing a detailed overview of the company to US authorities, Coinbase CEO Paul Grewal emphasized Ethereum’s (ETH) categorization as a commodity rather than a security. He noted that both the SEC and the market have consistently regarded ETH as a commodity.
“Our letter lays out what anyone knows who’s paid even the slightest bit of attention to the subject: ETH is not a security,” he said. “In fact, before and after the Merge, the SEC, the CFTC, and the market have treated ETH not as a security but a commodity.”
The company highlighted that the Commission has never officially declared Ethereum (ETH) as a security. Additionally, the Commission has not raised public objections to the Commodity Futures Trading Commission’s (CFTC) approval of ETH futures contracts for trading on platforms like the Chicago Mercantile Exchange (CME) and other designated contract markets (DCMs).
Another argument raised by Coinbase is that the Commission’s decision to approve Exchange-Traded Products (ETPs) for spot Bitcoin trading is relevant and applicable to the proposed listing and trading of Ether Trust Shares.
Therefore, the considerations and criteria used for approving Bitcoin ETPs should equally, and in certain aspects, apply to the proposed Shares associated with Ethereum.
Thirdly, Coinbase said that Ethereum’s blockchain possesses inherent technological and operational security mechanisms. These features are asserted to play a big role in reducing Ethereum (ETH)’s vulnerability to fraudulent activities and manipulation.
The US authority was also told that Ethereum (ETH) exhibits strong characteristics in its market behavior. The market depth, tight spreads, and price correlation across different trading platforms are highlighted as indicators of a market that is robust and resistant to fraudulent activities and manipulation.
“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,” Coinbase said.
Coinbase also mentioned that the Exchange shares surveillance information with the CME through its membership in the Intermarket Surveillance Group. This helps them exchange data collected by the CME from watching the CME ETH futures market.
As the CME ETH futures market closely relates to the ETH spot market, similar to recently approved spot Bitcoin ETPs, this collaboration is anticipated to aid in identifying fraudulent and manipulative activities in the ETH spot market.
Ultimately, the CEO noted that Coinbase is calling for the approval of ETP citing its grounds in the letter. He stated that Coinbase is dedicated to backing innovation and creating an open, secure, and inclusive financial system.
They aim to achieve this through ongoing discussions and research to make informed regulatory decisions in the ever-changing crypto environment.
