Grayscale, Coinbase sit down with SEC over spot Ether ETF

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Crypto firms Grayscale and Coinbase recently met with United States Securities and Exchange Commission (SEC) officials to discuss a rule change for the launch of spot Ether exchange-traded funds (ETFs). 

Grayscale is seeking to convert its Ethereum Trust — which tracks the market price of Ether (ETH) — into an ETF, similar to the conversion of its Bitcoin Trust to an ETF in January. The meeting, held on March 6, followed the end of the commenting period for the proposal and addressed concerns about possible market manipulation should the fund be approved.

According to a presentation shared by the SEC, Coinbase argued that the same reasoning that led to the approval of Bitcoin ETFs should be applied to Ether since the token has “mechanisms that significantly limit ETH’s susceptibility to fraud and manipulation.”

Presentation by Coinbase on March 6. Source: SEC

Another presentation point relates to Coinbase’s surveillance-sharing agreement with the Chicago Mercantile Exchange (CME). The mechanism was implemented for Bitcoin ETFs at the request of the SEC to improve trading monitoring.

Coinbase also emphasized the correlation between Ether futures and spot markets, similar to the Bitcoin market, noted Nate Geraci of ETF Store on X. “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 proposing a second ETF for Ether futures trading. The main difference between spot and futures markets is that spot market assets are traded immediately, whereas, in the futures market, contracts are made to buy or sell assets at a future date for a specific price.

Some analysts have suggested that Grayscale may be using its futures ETF application as a “trojan horse” to corner the SEC into approving its spot Ether ETF.

Several asset managers, including Invesco, Galaxy Digital, Fidelity, Franklin Templeton and BlackRock, are seeking the green light for a spot Ether ETF. Final deadlines for an SEC decision are expected in May.

Bloomberg’s Eric Balchunas believes asset managers are still in the dark about regulators’ views on the crypto 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 said.

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