Grayscale and Coinbase, two prominent crypto firms, recently held meetings with officials from the United States Securities and Exchange Commission (SEC) to discuss a potential rule change for the introduction of spot Ether exchange-traded funds (ETFs).
Grayscale wants to convert its Ethereum Trust, which tracks the market price of Ether (ETH), into an ETF, following the successful conversion of its Bitcoin Trust to an ETF earlier this year. The meeting took place on March 6, after the public commenting period ended, and focused on addressing concerns about potential market manipulation if the fund is approved.
During the meeting, Coinbase made a case for the approval of Ether ETFs, drawing parallels with the approval of Bitcoin ETFs. The company argued that Ether has mechanisms in place that significantly reduce its vulnerability to fraud and manipulation. Coinbase also highlighted its surveillance-sharing agreement with the Chicago Mercantile Exchange (CME), which was implemented for Bitcoin ETFs at the request of the SEC to enhance trading monitoring.
Nate Geraci of ETF Store on X pointed out the correlation between Ether futures and spot markets, similar to the Bitcoin market. He stated, “Add in the fact that the SEC approved Ether futures ETFs traded on the CME, and it’s unclear what grounds there would be for disapproving spot Ether ETFs.”
In addition to the spot Ether ETF proposal, Grayscale is also suggesting a second ETF for Ether futures trading. The main difference between spot and futures markets is that spot market assets are traded immediately, while futures contracts involve buying or selling assets at a future date for a predetermined price.
Some analysts have speculated that Grayscale may be using its futures ETF application as a strategic move to push the SEC into approving its spot Ether ETF. Several asset managers, including Invesco, Galaxy Digital, Fidelity, Franklin Templeton, and BlackRock, are also seeking approval for spot Ether ETFs. The SEC is expected to make a decision by May.
Eric Balchunas of Bloomberg believes that asset managers are still uncertain about the SEC’s stance on crypto investment vehicles. He noted, “Normally I would say this is a good sign, but as far as I know, the SEC has not provided any comments to the issuers yet, which is not a good sign considering they provided comments on Bitcoin ETFs.”
In light of these developments, there is ongoing debate about the potential risks and benefits of Ethereum restaking, with some viewing it as a promising blockchain innovation while others see it as a risky endeavor.