Coinbase Clashes with Senators Over Crypto ETF Approval Requests to SEC

Last Updated on March 15, 2024

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Key Takeaways:

  • Paul Grewal, Coinbase’s Chief Legal Officer, criticized U.S. senators’ call for stricter regulations on Bitcoin ETFs and the rejection of cryptocurrency ETF proposals, highlighting misinformation in their arguments.
  • Grewal emphasized the robustness of the cryptocurrency market, especially highlighting Ether’s trading volumes and liquidity, which surpass most of the largest traded equities, to support the approval of spot Ether ETFs.
  • The controversy centers on a letter from Senators Jack Reed and Laphonza Butler to the SEC, expressing concerns over crypto ETF approvals due to risks of fraud and manipulation in smaller cryptocurrency markets.

Coinbase’s Chief Legal Officer,¬†Paul Grewal, has vocally criticized a recent move by two U.S. senators who have pushed for the¬†Securities and Exchange Commission (SEC)¬†to impose¬†stricter regulations on Bitcoin ETFs¬†and to reject further cryptocurrency ETF proposals.

In a detailed post on¬†X (formerly Twitter)¬†dated March 15, Grewal addressed the senators’ March 11 letter that argued extending ETF approvals beyond Bitcoin would significantly increase¬†investor risk.

Grewal countered this perspective with robust arguments, highlighting¬†misinformation¬†in the senators’ claims.

He pointed out the robustness of the cryptocurrency market, especially Ether (ETH), which showcases trading volumes and liquidity metrics surpassing those of the majority of the largest traded equities.

Specifically, Grewal noted that Ether’s spot market depth and liquidity are so substantial that only two stocks in the S&P 500 boast higher notional dollar trading volumes.

Further emphasizing the solidity of the cryptocurrency markets, Grewal presented evidence of the¬†high correlation between Ether’s futures and spot markets to that of Bitcoin’s, which supports the argument for market surveillance capabilities.

paulgrewals tweet

This argument forms part of Coinbase’s broader strategy to advocate for the SEC’s approval of¬†spot Ether ETFs, following precedent set by the approval of Bitcoin ETFs.

This discussion comes in the wake of a meeting on March 9, where Coinbase and Grayscale, a crypto asset manager, presented their case to SEC officials, arguing for a rule change to facilitate the launch of spot Ether ETFs.

There’s speculation in the industry, suggesting Grayscale’s futures ETF application might be strategically aimed at securing approval for its¬†spot Ether ETF.

ETF Exchange-traded fund stock market business finance investment concept.

The dialogue around the SEC’s impending decision on Ether ETFs, expected by May 23, has intensified, with many viewing Coinbase’s stance as a full commitment to securing approval for¬†spot Ether ETFs.

Nate Geraci, President of the ETF Store, criticized the SEC’s hesitance as¬†politically motivated rather than investor-focused, highlighting the approval of Ether futures ETFs despite the SEC’s concerns over market correlation.

The controversy stems from a March 11 letter by Democratic Senators Jack Reed and Laphonza Butler to SEC Chair Gary Gensler, in which they express concerns over the risks of further crypto ETF approvals.

They argue that smaller cryptocurrency markets, in comparison to Bitcoin, are more susceptible to fraud and manipulation, advocating for heightened regulatory scrutiny over Bitcoin ETFs and cautioning against the approval of ETFs for other cryptocurrencies.

As the SEC reviews eight pending spot Ether ETF applications, the crypto community eagerly anticipates the potential for broader acceptance of altcoin ETFs, amidst ongoing debates over regulatory oversight and the balance between innovation and investor protection.

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