Coinbase (NASDAQ:COIN), operator of the largest regulated crypto exchange, is supportive of a spot bitcoin exchange traded fund.

Specifically, the crypto trading giant is supportive of Grayscale’s efforts to convert the popular Grayscale Bitcoin Trust (GBTC) — an index fund — to an ETF. Coinbase is making its feelings known to the Securities and Exchange Commission (SEC).

“We believe investors should have access to GBTC in an ETP format because it offers a tried and tested way for retail investors to gain exposure to Bitcoin at prices that closely reflect spot Bitcoin trading prices without holding it themselves,” writes Coinbase in a letter to the SEC. “Shares of GBTC are currently offered to accredited investors within the meaning of Regulation D under the Securities Act of 1933, as amended (the ‘Securities Act’).”

To date, the only bitcoin ETFs approved in the U.S. are futures-based products. There are also ETFs, such as the Grayscale Future of Finance ETF (GFOF), which are equities-based plays on crypto-correlated stocks, including bitcoin miners and companies like Coinbase and Block (NYSE:SQ).

However, it’s widely believed that if regulators sign off on a spot bitcoin ETF, that fund is likely to be the most successful new ETF of all time, potentially gathering billions of dollars of assets in just a matter of days.

In other words, investors are clamoring for GBTC to be converted to an ETF. Regulators are currently less enthusiastic, but as Coinbase notes, current GBTC investors are likely to benefit if the fund becomes an ETF.

“Until recently, GBTC was the only product that retail investors could use to access Bitcoin through a traditional brokerage account,” adds the exchange operator. “However, despite GBTC’s appeal and wide availability, it is not yet eligible to offer continuous share redemptions and creations, which is the mechanism ETPs employ to align share trading prices with underlying asset prices.”

Index funds can trade at prices above or below their net asset values, occasionally by wide margins, but wide NAV to market price gaps are rare among ETFs, indicating that GBTC investors would derive benefit from the index fund-to-ETF conversion.

“If Arca’s proposal is approved, GBTC will be able to use the ETP mechanics that minimize the variations between its share trading prices and the net-asset value (‘NAV’) of its Bitcoin holdings, and as a result, U.S. retail investors will be able to gain access to the Bitcoin market through the familiar ETP structure and at trading prices that stay more closely aligned with spot Bitcoin prices,” concludes Coinbase.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.