Consensys addressed the United States Securities and Exchange Commission (SEC)’s inquiry about potential fraud and manipulation risks related to Ethereum’s proof-of-stake system, particularly concerning spot Ether exchange-traded funds (ETFs).
In a comment letter submitted to the regulatory agency, Consensys, the blockchain and Web3 software development company responsible for the popular MetaMask wallet, stated that concerns about fraud and manipulation are baseless.
Consensys explained in a blog post,
“In fact, Ethereum’s PoS implementation meets and even exceeds the security of Bitcoin’s proof-of-work (PoW), which underlies Bitcoin-based ETFs that have already been approved for trading by the SEC”
The Ethereum infrastructure firm highlighted Ethereum’s advantages— quicker block finality than Bitcoin, a division of responsibilities between proposers and attesters to deter stakeholder dominance, higher attack costs, penalties for validator rule violations, and superior environmental sustainability compared to Bitcoin.
Consensys highlighted that Ethereum boasts a larger developer community than Bitcoin and operates on a fully transparent and public blockchain. Consensys urged the SEC to acknowledge Ethereum’s superior security features, surpassing those of Bitcoin-based ETPs previously approved by the SEC.
Although spot Bitcoin ETFs have proven exceptionally popular, whether or not a spot Ether ETF will be approved in May of this year remains debatable.
Related: Bitwise files with SEC for spot Ether ETF listing
The final SEC deadline for approving or denying the next round of spot ETH ETF applications will come on May 23, starting with VanEck’s investment vehicle. Though many experts seemed to be optimistic about approval in 2023, some have suggested going into 2024 that the commission could deny applications.
Several firms have spot ETH ETF applications pending approval or denial, including Fidelity, Hashdex and ARK 21Shares. The SEC began approving investment vehicles tied to Ether futures in October 2023.
Crypto gamblers are placing bets on whether spot Ether ETFs will be approved by the United States SEC before May 31. The overall bets on the ETF outcomes have reached at least $12 million on the predictions market. The SEC eventually approved the trading and listing of 11 spot Bitcoin ETFs on Jan. 10.
Investment management company Grayscale has expressed confidence in a favorable decision by the SEC for spot Ether ETFs by May. On March 25, Grayscale chief legal officer Craig Salm said that the SEC’s perceived “lack of engagement” with applicants does not indicate whether an ETF will be approved.