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Coinbase argues for spot Ether ETFs as analysts warn of ‘concentration risk’
“Our letter lays out what anyone knows who’s paid even the slightest bit of attention to the subject: ETH is not a security,” said Coinbase’s chief legal officer. United States crypto exchange Coinbase has stood firmly behind Grayscale in its application to convert its Ethereum Trust into a spot Ether exchange-traded product, with one of its key arguments being that Ether is not a security. On Feb. 22, Coinbase chief legal officer Paul Grewal shared the firm’s 27-page letter outlining the legal, technical, and economic rationale why the Securities and Exchange Commission should approve an Ether-based ETP. Coinbase made five major arguments in total, though its most striking was its argument that ETH tickers down $2,941 is appropriately classified as a commodity, not a security, as reflected by the Commodity Futures Trading Commission’s approval of ETH futures, statements by SEC officials, and court rulings. Moreover, the SEC has not objected to the CFTC’s treatment of ETH as a commodity, it stated. “Our letter lays out what anyone knows who’s paid even the slightest bit of attention to the subject: ETH is not a security,” Grewal wrote on X before adding, “In fact, before and after the Merge, the SEC, the CFTC, and the market have treated ETH not as a security but a commodity.” Additionally, Ethereum’s proof-of-stake consensus has “demonstrably strong governance that exhibits robust characteristics across ownership concentration, consensus, liquidity, and governance, mitigating risks of fraud and manipulation,” he continued. Ether ETFs could “exacerbate concentration risk” Just two days earlier, analysts from rating agency S&P Global shared concerns that spot Ethereum ETFs that include staking could “introduce new concentration risk” to the blockchain network. Some spot Ethereum ETF applicants such as ARK Invest and Franklin Templeton are proposing to allow staking in the fund. “An increase in ether staking ETFs could affect the mix of validators participating in the Ethereum network's consensus mechanism,” said Managing Director Andrew O'Neill. “The participation of institutional custodians could reduce the current concentration on the Lido decentralized staking protocol. However, it may also introduce new concentration risk, particularly if a single entity is chosen to stake the bulk of ether included in these ETFs.” Lido currently has a 31.5% share of all staked Ethereum, according to Dune Analytics. #Coinbase #Ethereum #SEC #ETF #Grayscale Source - Coin Telegraph
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