Coinbase fired back at senators asking the SEC to stop crypto ETF approvals

Coinbase Chief Legal Officer Paul Grewal criticized a letter by two United States senators urging the SEC to more strictly regulate Bitcoin ETFs and reject any further crypto ETF applications.

In a March 15 post for X, Grewal criticized the senator's recent March 11 letter — which asked for the approval of more crypto ETFs beyond bitcoin — exposing investors to “significant risks.”

“Honorable senators, the evidence points exactly the opposite way,” Grewal responded.

Grewal noted that the market for cryptocurrencies smaller than Bitcoin, particularly Ether (ETH), has shown quality metrics “even outperforming large-cap trading stocks.”

“The ETH spot market is deep and liquid – only two S&P 500 stocks have higher dollar trading volume,” added Grewal.

Grewal added that there is direct evidence that Ether futures and spot markets are as correlated as Bitcoins.

“Compared to Bitcoin, the ETH futures and spot markets actually show a high and consistent correlation that enables market tracking.”

On March 9, Coinbase and crypto asset manager Grayscale met with SEC officials to discuss a change in regulations for the launch of Ether ETFs. Coinbase argued that if the SEC approves Bitcoin ETFs, they should also approve Ether ETFs.

Some analysts have suggested that Grayscale could use the futures ETF application as a “Trojan horse” to get the SEC to approve the spot Ether ETF.

Several industry analysts, including VB Capital general partner Scott Johnson and Bloomberg ETF analyst Eric Balchunas, have predicted that the SEC is looking to reject pending ETH ETFs based on “correlation” — the difference between spot and futures prices.

ETF Store President Nate Gerasi said it's clear that Coinbase is now “going all in” on its support for Ether ETFs, hinting that conflict between the crypto exchange and the regulator could soon escalate ahead of the May 23 deadline for ETH. The decision of the ETF.

“None of this is about ‘protecting investors', it's all about politics. sad. It's all sour grapes b/c investors want exposure to btc ETFs,” Gerasi said in a follow-up post.

Geraci added that the SEC is apparently preparing to reject pending Ether ETF applications on the grounds of nexus, but pointed out that they have approved Ether futures ETFs.

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In a March 11 letter to SEC Chairman Gary Gensler, the two Democratic senators, Jack Reed and Lafonza Butler, said any additional crypto ETF approval would expose investors to risks from “thinly traded” markets through fraud and fraud.

Alongside a series of calls for tighter regulation of Bitcoin ETFs, Reed and Butler added that markets for cryptocurrencies smaller than bitcoin are “very vulnerable to misconduct.”

There are currently eight proposed Ether ETF applications awaiting approval by the SEC, and there have been hopes that other altcoins may eventually follow suit.

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