Coinbase Responds Firmly to Senators Calling for a Stop to Crypto ETF Approvals

Coinbase’s Chief Legal Officer, Paul Grewal, has voiced his opposition to a communication from two American senators who pushed the SEC to adopt stricter rules concerning Bitcoin-based exchange-traded funds and to halt the approval of new cryptocurrency ETFs.

In a series of tweets on March 15, Grewal confronted the positions held by senators Jack Reed and Laphonza Butler, making a case for the inclusion of a broader range of assets, such as Ethereum, in the ETF marketplace.

Grewal’s Support for Broader Cryptocurrency ETFs

“With all due respect, Senators, the data actually suggests the contrary,” Grewal claimed.

Grewal pointed out the strength of digital assets besides Bitcoin, using Ethereum as an example. He mentioned that Ethereum’s market performance and analytical data are on par with some of the largest companies listed on the S&P 500.

He also emphasized Ethereum’s comparable levels of correlation, arguing that it’s well-suited for market surveillance, similar to Bitcoin, in both future and spot markets.

The Coinbase legal head referred to a recent submission to the SEC that outlined the legal, technical, and economic justifications supporting the authorization of an Ethereum-based Exchange-Traded Product (ETP).

Criticism from Senators Reed and Butler

Senators Jack Reed and Laphonza Butler, in their letter dated March 11, cautioned the SEC against the endorsement of further crypto ETFs, citing concerns about investor exposure to markets that are prone to manipulation and potentially fraudulent activities.

The senators warned, “ETPs connected to thinly traded cryptocurrencies or those particularly vulnerable to schemes such as pump-and-dump pose severe risks for retail investors.”

The senators called for restraint, insisting that recent spot Bitcoin ETF approvals should not automatically lead to the same treatment for new entrants, given the comparatively scrutinized nature of Bitcoin’s market.

They further suggested that the regulatory review for spot Bitcoin ETFs be intensified to protect investors, including close monitoring of brokers and advisors.

Their skepticism extended to the appropriateness of other cryptocurrencies in underpinning their ETPs, pointing to inadequate trade volumes and lack of market integrity. Furthermore, they expressed reservations about whether futures markets for other cryptocurrencies would display the recommended correlation with their respective spot markets to allow for effective market monitoring, crucial to combating fraudulent players.

Currently, the SEC is evaluating eight applications for spot Ethereum ETFs, and the possibility remains for additional altcoins to seek approval down the line.