SEC vs. Ethereum ETFs: Coinbase, Valkyrie Weigh In

The unfolding narrative of the SEC's scrutiny over Ethereum exchange-traded fund (ETF) proposals is becoming an all too familiar circus. For crypto fanatics, ETH ETF approvals are a no-brainer but for regulators, it's yet another slippery slope into the deep, vacuous Web3 rabbit hole.

With Bitcoin ETFs finally approved after months of painstaking back-and-forth, the digital assets industry earned its biggest win in regulatory history, to the benefit of both themselves and TradFi.

Two months later, Bitcoin ETFs are one of the hottest commodities on the market, even muscling out silver. Most recently, VanEck's spot Bitcoin ETF, also known as HODL, saw its daily volume exceeding $300 million. The figure represents a 1,000% increase from its previous peak.

But yet, the SEC is still reluctant to approve Ethereum ETFs any time soon. Now delayed until at least May, the SEC has pushed back making a decision on approving the product multiple times.

Valkyrie chief investment officer Steven McClurg has shared his view on the regulatory body, and he's not optimistic.

"There was a lot of work put into getting spot bitcoin launched on behalf of regulators and the SEC, as well as the issuers," McClurg said. "It's a new asset class so there's a lot to learn." 

BRRR, Valkyrie's Bitcoin ETF, has $144.53 in AUM. The firm also has a "Bitcoin and Ether Strategy ETF" on the NASDAQ in which it purchases Ether Futures contracts.

Valkyrie also recently announced a 2x leveraged Bitcoin futures ETF, which aims to double the daily performance of the CME Bitcoin Futures index.

However, McClurg highlighted that Bitcoin and Ethereum are two very different assets. "I think it will take the SEC a lot of time to get their head around what disclosures look like for a product like that,' McClurg said.

"So it could take another year just to understand the disclosure aspect." 

Meanwhile, Coinbase is publicly urging the SEC to push through with approving ETH ETFs, offering its methodology. In a thread on X, Coinbase chief lawyer, Paul Grewal, said Grayscale’s application must be approved by first converting the ETH trust into an instrument.

The listed crypto exchange had a call with the SEC and sent a letter to the regulator detailing their advisory steps.

"Our letter lays out what anyone knows who's paid even the slightest bit of attention to the subject: ETH is not a security. In fact, before and after the Merge, the SEC, the CFTC, and the market have treated ETH not as a security but a commodity," Grewal stated on X.

"The characteristics of the Ether (ETH) market and the Exchange’s surveillance-sharing agreement with the Chicago Mercantile Exchange Inc. (CME), as described in the data and analysis in this letter, support the position that the Exchange’s proposed rule change should be approved for virtually identical reasons articulated by the Commission with respect to spot Bitcoin exchange-traded products (ETPs)," he urged in the letter.

In its most recent earnings, Coinbase announced its first profit in two years, citing Bitcoin ETFs as a "win-win."