Grayscale CLO Confident Ether ETF’s Greenlight Despite SEC’s Passive Stance
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Craig Salm, the Chief Legal Officer (CLO) at Grayscale, has, on March 25, expressed optimism about the approval of applications for spot Ether exchange-traded funds (ETFs), which is scheduled for May 2024.
His statement came in the wake of concerns and debate about the US Securities and Exchange Commission (SEC) lack of communication with applicants.
SEC’s Spot Ether ETF Regulatory Process Similar to Spot Bitcoin ETF
Salm explained in a thread posted on X that he is not deterred by chatters on a potential denial of spot Ether ETF applications. He reiterated that a perceived “lack of SEC engagement” should not indicate a negative outcome of the Ether ETF proposal.
1/ Recently, there’s been a lot of chatter about spot #Ethereum ETFs. I personally am not deterred by it and believe the ETFs should be approved. But right now I want to talk about how I think perceived “lack of SEC engagement” should be viewed at this point:
— Craig Salm (@CraigSalm) March 25, 2024
The CLO hinged his belief on past experiences with spot Bitcoin ETFs, as he claimed that the regulatory process of spot Ether ETF is similar to the process of spot Bitcoin ETF approval in January 2024.
He noted that in the final months of the build-up to Bitcoin ETF approval, Grayscale and other applicants received positive and constructive engagements from the SEC.
2/ In the final months leading up to #Bitcoin ETF approval, @Grayscale and others received positive and constructive engagement from the SEC. We had thoughtful conversations and discussed the finer details of creation/redemption procedures, cash v. in-kind, APs, LPs, custody etc.
— Craig Salm (@CraigSalm) March 25, 2024
The CLO further disclosed key issues such as the creation and redemption procedures, cash and in-kind models, authorized participants (APs), and liquidity providers (LPs), which were discussed extensively before the approval.
Salm noted that the constructive engagements of the SEC with spot Bitcoin ETF are identical to the ongoing spot Ether ETF regulatory process. This is because discussions about Ether ETF involve operational and legal aspects similar to Bitcoin ETF.
Furthermore, he emphasized that the underlying principles that govern ETF activities remain the same, regardless of the asset.
3/ All of these issues were figured out and are identical when comparing spot #Bitcoin to #Ethereum ETFs. The only difference is rather than the ETF holding bitcoin, it holds ether. So in many ways, the SEC already has engaged and issuers simply have less to engage on this time.
— Craig Salm (@CraigSalm) March 25, 2024
Meanwhile, it could be recalled that the SEC has delayed decisions on the approval of Grayscale’s spot Ether ETF.
Also, the decision of the regulatory body came earlier before the US Democratic Senators Jack Reed and Laphonza Butler wrote to Chair SEC Gary Gensler to reject spot Ether applications due to perceived risks for retail investors and difficulties in reviewing them.
Salm’s Sentiments Align with Coinbase CLO Amidst Ongoing Probe
Salm concluded his viewpoints by referencing an agreement with Paul Grewal, Coinbase CLO’s latest comments on SEC delays and misinformation about spot Ether ETF’s ongoing regulatory process.
Grewal had on March 21 posted on X that the SEC has “no good reason” to deny Ether ETF applications.
The SEC has no good reason to deny the ETH ETP applications. And we hope they won’t try to invent one by questioning the long established regulatory status of ETH, which the SEC has repeatedly endorsed. That’s not how the law works. And Americans deserve better. 10/10
— paulgrewal.eth (@iampaulgrewal) March 20, 2024
However, some crypto community members believed Grewal’s post follows news of an ongoing SEC probe on the Ethereum Foundation on March 20.
While some analysts have predicted stricter regulations on cryptocurrencies, a significant drop in ETH price, and spot Ether ETF disapproval if the SEC succeeds in classifying Ethereum as a security, Grewal argued that the SEC had previously declared ETH as a commodity.
In other words, he highlighted that senior SEC officials, like former Director of Corporation Finance William Hinman’s speech in 2018, suggested that ETH was not a security.
Ex. A. Senior SEC officials have said ETH is not a security, see e.g. SEC Director of Corporation Finance Hinman’s statement https://t.co/efXqCx4iyw 3/10
— paulgrewal.eth (@iampaulgrewal) March 20, 2024
Grewal further disclosed that SEC Chair Gary Gensler testified to the US House of Representatives in July 2018 that Ether is not a security.
https://x.com/iampaulgrewal/status/1770594625767797000?s=20
As the Coinbase CLO remained confident that the SEC will not find reasons to deny spot Ether ETF approval, Salm expressed his support for Ether users, who he said deserve spot ETF.