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Coinbase responds to the SEC’s attack on the new Bitcoin ETFs

On March 11, two US senators, Jack Reed and Laphonza Butler, sent a letter to SEC President Gary Gensler asking not to approve any more crypto ETFs after the one on Bitcoin: Coinbase immediately enters into conflict.

According to the two Democrats, the introduction of other cryptographic investment tools would expose retail investors to too high risks.

Coinbase, which obviously has a vested interest in new crypto ETFs being approved, dissociates itself from what was highlighted by the senators, stating that the provocations are completely misleading.

The main issue at stake is the question of exchange-traded funds for Ethereum, with the SEC deadline set for May.

All the details below.


Stop to new ETF approvals after those on Bitcoin by the SEC: Coinbase attacks the two US senators

Senators Jack Reed and Laphonza Butler are trying in every way to limit the exposure of new crypto ETFs to US investors, urging the SEC president to stick to those on Bitcoin.

The reason for this request, formally made through a letter from the Senate, is that according to the two politicians, the presence of additional cryptographic exchange traded funds would trigger potential “enormous risks” for retail investors.

In the letter, there are phrases of contempt towards the world of digital assets, described as “low-traded” markets and places where fraud and manipulations reign.

Here is what the senators described textually:

“As much as Bitcoin may be vulnerable to fraud and manipulation, the markets of other cryptocurrencies are much more exposed to unethical behaviors.”

Reed and Butler also ask Gary Gensler that Bitcoin ETF brokers and consultants be subjected to strict regulatory controls, with the aim of protecting American savers.

Regarding the pressures from the Democrats, Alexander Grieve, head of government relations at the venture capital company Paradigm, noted how the letter sent a few days ago by the senators to the SEC represents a living testimony of how the decisions of the federal agency can be influenced by political life.

The success of the BTC spot products clearly ruffling some feathers on the Hill. @SenatorJackReed and @Senlaphonza write to the @SECGov urging:
-no further ETPs for other tokens
-make life difficult (i.e. examinations/reviews) for brokers and advisers that recommend BTC ETPs

— Alexander Grieve (@AlexanderGrieve) March 14, 2024

On the plate is the decision that the SEC will have to make in May regarding the approval or rejection of 8 pending ETF requests on Ethereum at US exchanges.

Experts suggest that following the Senate’s urging, Gensler may be more inclined to reject the offer from Fund Managers who wish to offer investment products in ether to their clients, given the results obtained on Bitcoin.

In this regard, we report the data on volumes of ETFs in the month of March, where 65 billion dollars in trades were reached in just 15 days

These incredibly high numbers are in contrast to what was erroneously emphasized by the two senators in the letter to the SEC, where they wrote that the cryptocurrency markets are not well attended and have few transactions.

JUST IN: #Bitcoin ETFs did $65b trading volume so far in March.

💥SMASHING February’s total volume in just 2 weeks!

🫡 @EricBalchunas

— Bitcoin Archive (@BTC_Archive) March 14, 2024

Eric Balchunas, ETF analyst at Bloomberg, highlighted how the approval odds for an exchange-traded fund on Ethereum were twice as high just two months ago, when the same expert had set them at 70%.

Now the chances of success in this sense have been reduced to 35%, precisely because of the interference of the political sphere in the world of investments:

In a post on March 15, Balchunas declared that:

“The success of the Bitcoin ETF is shocking to high-ranking Democrats. Buyer’s remorse. This is one of the reasons we are pessimistic about the chances of ETF approval.”

Coinbase responds: Senate provocations are misleading

The cryptocurrency exchange Coinbase, the direct target of the pressures advanced by US senators Jack Reed and Laphonza Butler to the SEC, has responded to the provocations by making its voice heard.

The legal counsel of Coinbase, Paul Grewal, has noted how the letter sent to Gensler on March 11 is blatantly misleading as it describes a situation completely reversed compared to the actual dynamics observed in the cryptographic landscape.

Indeed, in the markets of Bitcoin and Ethereum they would be correlated with each other, as well as with the rest of the existing cryptocurrencies, and no additional manipulation risks would be added with the introduction of a new ETF.

“Compared to Bitcoin, the futures and spot market of ETH show EXACTLY the same type of high and consistent correlation that would allow market surveillance.”

Furthermore, Ether markets, unlike what two senators presented, are particularly liquid and with many trades behind them.

Grewal in particular observed how the latter even outperforms the market of the most traded stocks in the country:

“The ETH spot market is deep and liquid: only two S&P 500 securities have a higher notional trading volume in dollars”

Respectfully Senators, the evidence points exactly the opposite way. We have discussed our analysis with SEC staff and would be happy to do the same for you and any other policy makers who have questions. 1/7

— paulgrewal.eth (@iampaulgrewal) March 15, 2024

It is clear, therefore, that at this point we are no longer talking about what is good for the community and investors, but rather about the will of politics that is pressuring only to push forward its own anti-crypto campaigns.

Coinbase is not backing down, and just like it did in the past for the Bitcoin ETF, it is preparing for conflict with all the necessary resources.

According to experts, given the current context, it is likely that the SEC will take the lead in rejecting the new exchange traded funds on Ethereum, citing price discrepancies between futures and spot exchanges, raising doubts about the nature (security or not) of the asset and resuming the theme of manipulation advanced by democratic senators.

Anyway Coinbase, joining forces with Grayscale who intends to use its futures request to checkmate the SEC, could change the game in the coming weeks.