Leading crypto investment firm Grayscale and major cryptocurrency exchange Coinbase met with officials from the US Securities and Exchange Commission (SEC) to discuss the potential conversion of Grayscale’s Ethereum Trust (ETHE) into a spot-based exchange-traded fund (ETF).
This meeting comes after Grayscale submitted a proposal in October 2023 seeking regulatory approval to transform its ETHE trust, which currently tracks the price of Ether (ETH), into a tradable ETF similar to several recently approved Bitcoin ETFs.
The SEC has historically been cautious about approving spot-based crypto ETFs, citing concerns about potential manipulation and lack of adequate regulatory oversight within the underlying crypto markets. The meeting with Grayscale and Coinbase aimed to address these concerns and pave the way for potential approval.
According to a presentation shared by the SEC, Coinbase argued that Ether, the world’s second-largest cryptocurrency by market capitalization, shares characteristics with Bitcoin, for which ETFs have already been approved. They emphasized the presence of mechanisms within the Ethereum network that mitigate the risk of fraud and manipulation.
Coinbase also highlighted its existing surveillance-sharing agreement with the Chicago Mercantile Exchange (CME), a mechanism implemented for Bitcoin ETFs at the SEC’s request to enhance trade monitoring capabilities.
The outcome of the meeting remains unclear. While some analysts view it as a positive step forward, others caution against over-optimism. The SEC has yet to announce a decision on Grayscale’s proposal, and the regulatory approval process for crypto ETFs can be lengthy.
The potential approval of a spot Ether ETF would mark a significant development for the cryptocurrency industry, potentially increasing mainstream investor access to Ethereum and boosting its overall market legitimacy. However, the SEC will likely continue to scrutinize the proposal before making a final decision.
