Amidst growing debates over the regulation of cryptocurrency ETFs, Coinbase’s chief legal officer, Paul Grewal, has criticized a recent letter by two United States senators urging the SEC to tighten regulations on Bitcoin ETFs and reject further crypto ETF applications.
Grewal’s response, posted on March 15 on X, rebuffed the senators’ claims that approving additional crypto ETFs beyond Bitcoin would expose investors to significant risks. He argued that the evidence suggests otherwise, particularly pointing to smaller cryptocurrencies like Ether, which demonstrate quality metrics surpassing even some of the largest traded equities.
“Respectfully Senators, the evidence points exactly the opposite way,” Grewal stated. He highlighted Ether’s deep and liquid spot market, noting that only two S&P 500 stocks boast higher notional dollar trading volume than Ether.
Moreover, Grewal emphasized the correlation between Ether’s futures and spot markets, asserting that they are as closely linked as Bitcoin’s. This stance aligns with Coinbase’s recent meeting with SEC officials alongside crypto asset manager Grayscale, where they advocated for a rule change to enable the launch of spot Ether ETFs. Coinbase argued that if Bitcoin ETFs were approved, Ether ETFs should also receive approval.
Speculation has arisen regarding Grayscale’s motives, with some analysts suggesting that their futures ETF application might be a strategic move to pressure the SEC into approving spot Ether ETFs.
Industry experts, including VB Capital’s general partner Scott Johnson and Bloomberg ETF analyst Eric Balchunas, predict that the SEC may reject pending Ether ETFs due to concerns about correlation, specifically regarding the price disparity between spot and futures markets.
Nate Geraci, president of the ETF Store, observed that Coinbase’s strong support for spot Ether ETFs indicates a shift in strategy and potential conflict with regulators leading up to the May 23 deadline for an ETH ETF decision. Geraci expressed skepticism about the SEC’s motivations, arguing that the issue is more about politics than protecting investors’ interests.
While Geraci acknowledged the SEC’s approval of Ether futures ETFs, he criticized the impending rejection of spot Ether ETFs based on correlation concerns. This decision could mark a significant development in the regulatory landscape for cryptocurrency ETFs, with Coinbase and other stakeholders pushing for greater acceptance and market access for digital assets.
