n its submission dated February 21, 2024, Coinbase highlighted that both the SEC and other regulators like the CFTC have recognized Ethereum as a commodity rather than a security. This is the essential classification that allows the consideration of an ETF based on ETH.
The exchange also pointed to the approval of multiple Bitcoin ETFs as an important precedent that warrants a consistent approach in the assessment of an Ethereum product. Coinbase argued ETH exhibits the same attributes of market resilience and depth demonstrated by BTC to satisfy the SEC's standards.
Technological Advancements Boost Ethereum's Credentials
One of the primary topics covered was Ethereum's underlying technical infrastructure and ongoing progress. Coinbase zeroed in on the recent Magneto/Merge upgrade that transitioned the network to a Proof-of-Stake consensus model.
This change was portrayed as a major security enhancement, reducing susceptibility to hacking and manipulation. The submission stressed how the Merge strengthened Ethereum's reliability and strengthened the case for its suitability as an ETF asset.
Established Market Dynamics Inspire Confidence
Coinbase's response also delved into analysis highlighting qualities like Ethereum's market depth, tight bid-ask spreads, and price correlation between exchanges. These characteristics were said to be strong indicators of resilience against fraud and market manipulation.
Liquidity, order book metrics, and 24-hour trading volumes were among the empirical data presented to underscore Ethereum's maturity and functioning as a global, efficient market. This evidence supported the argument for regulatory approval of an ETF tracking its price movements.
Commitment to Transparency and Oversight
The final points stressed how the surveillance-sharing cooperation between Coinbase and the CME would facilitate the monitoring of Ethereum trading activity across both platforms. This agreement was presented as an important measure for flagging and preventing any fraudulent behavior.
Together with routine disclosure requirements, Coinbase contended such oversight frameworks would grant investors sufficient protections while unlocking Ethereum's potential through a familiar investment vehicle like an ETF.
SEC Decision Awaited in Coming Months
Coinbase provided the SEC with a robustly researched, multi-pronged appeal for authorizing a spot ETH ETF. From aligning with prior regulatory perspectives to dissecting technical dimensions and quantifying market dynamics, their commentary formed a comprehensive treatise.
A decision on Grayscale's proposal may be reached by May, according to some estimates. However, uncertainty remains over the outcome as the SEC undertakes scrutiny of Coinbase's arguments and Ethereum's evolution as a digital asset.
