Consensys, the parent company of self-custodial wallet MetaMask, urged the Securities and Exchange Commission to approve a spot Ethereum ETF, emphasizing Ethereum’s security features.
The Securities and Exchange Commission (SEC) is reportedly investigating ETH’s securities status, a move that has dampened market sentiment and many expect the ETF’s approval to be delayed.
Consensys submits opinion
To strengthen the case for a spot Ethereum ETF, Consensys filed a comment letter with the Securities and Exchange Commission pointing out the strong security measures inherent in Ethereum’s design. The letter, which was also published as a blog post on the Consensys website, provided details about the distributed verification process that Ethereum implements. It also addresses the Commission’s investigations and concerns regarding Ethereum’s proof-of-stake consensus mechanism and its vulnerability to fraud and manipulation.
Consensys argued in the letter that Ethereum’s proof-of-stake consensus mechanism surpasses Bitcoin’s proof-of-work security, which already has SEC approval for exchange-traded products (ETPs). The letter also pointed out anti-fraud and anti-tampering mechanisms built into Ethereum. This can help provide relatively strong resistance to tampering compared to Bitcoin’s proof-of-work model.
Consensys also noted that Ethereum offers faster block finality without any reversal in a very short period of time. This is because Ethereum uses random and distributed verification procedures. This prevents control by large stakeholders and prevents malicious actors from gaining influence. They also highlight the low energy consumption of Ethereum’s proof-of-stake, citing research showing that the cost of attempting to compromise Ethereum’s network is much higher than Bitcoin’s.
“The SEC recently requested comment on the potential approval of an Ether ETF application seeking information on whether Ethereum’s proof-of-stake (PoS) raises “unique concerns” about fraud and manipulation that the agency should consider. We submitted a response letter explaining why those concerns were completely meritless. In fact, Ethereum’s PoS implementation meets or even exceeds the security of Bitcoin Proof of Work (PoW), which underlies the Bitcoin-based ETF that has already been approved for trading by the SEC.”
proactive attitude
Coinbase’s proactive stance in defense of a spot Ethereum ETF highlights its efforts to advance the adoption of blockchain technology. Consensys hopes to pave the way for broader accessibility to decentralized finance (DeFi) and Web3 applications through constructive dialogue with regulators such as the Securities and Exchange Commission. While the committee evaluates input provided by Consensys and other stakeholders, the outcome of its deliberations will have significant implications for the larger cryptocurrency market. Collaborative efforts between regulators and key industry players are critical to fostering innovation and ensuring investor protection.
Disclaimer: This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.