Consensys recently responded to an inquiry by the United States Securities and Exchange Commission (SEC) regarding concerns about the potential for fraud and manipulation within Ethereum’s proof-of-stake (PoS) system, especially in relation to spot Ether exchange-traded funds (ETFs).
In a comment letter to the SEC, Consensys, a leading blockchain and Web3 software development firm known for creating the MetaMask wallet, argued that the worries about fraud and manipulation are unfounded.
The company elaborated on its position in a blog post, asserting, “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.”
Consensys outlined several features of Ethereum that contribute to its security advantages over Bitcoin, including quicker block finality, a split of duties between proposers and attesters to prevent dominance by any single group, higher costs for potential attackers, strict penalties for validator misconduct, and greater environmental sustainability.
Moreover, Consensys emphasized Ethereum’s extensive developer community and its operation on a fully transparent and public blockchain.
The firm urged the SEC to recognize these superior security attributes, which exceed those of Bitcoin-based ETPs already sanctioned by the SEC.
While spot Bitcoin ETFs have garnered significant interest, the approval of a spot Ether ETF within 2023 remains uncertain.
The SEC has set a deadline of May 23 to decide on the pending spot ETH ETF applications, starting with VanEck’s proposal.
Despite optimism from some experts about an approval in 2023, there’s speculation that the SEC may defer its decision into 2024.
Companies such as Fidelity, Hashdex, and ARK 21Shares are among those with pending spot ETH ETF applications. The SEC began green-lighting Ether futures-linked investment vehicles in October 2023.
The crypto betting markets are closely watching the SEC’s decisions, with over $12 million wagered on the outcome of the spot Ether ETF approvals before the end of May.
Previously, the SEC approved 11 spot Bitcoin ETFs on January 10. Grayscale, an investment management firm, has expressed hope for a positive verdict from the SEC on spot Ether ETFs by May.
Grayscale’s Chief Legal Officer, Craig Salm, noted on March 25 that the SEC’s current lack of direct engagement with ETF applicants does not necessarily indicate the outcome of their decisions.
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