As the regulatory landscape around cryptocurrencies evolves, the potential for exchange-traded funds (ETFs) to incorporate staking has gained significant momentum. Cboe BZX Exchange Inc. has filed with the US Securities and Exchange Commission (SEC) to allow staking on Ether-based ETFs, joining the push for passive income opportunities in the crypto market.
Cboe and NYSE Arca Push for Staking on Ethereum ETFs
Cboe’s recent filing is a request for regulators to approve staking on Fidelity’s Ethereum Fund, a move that follows similar paperwork for the 21Shares Core Ethereum ETF. Meanwhile, NYSE Arca Inc. has also petitioned the SEC to allow staking for Ethereum products from Grayscale Investments.
Bitwise, another prominent crypto firm, is exploring the possibility of submitting a similar request for staking on Ethereum-based ETFs. “ETPs should stake. We’ve seen in Europe that staking ETPs work and help increase investor returns and boost network security,” said Matt Hougan, Bitwise’s Chief Investment Officer. Bitwise’s move to acquire an Ethereum staking service underscores the firm’s aggressive push to bring staking to the US market.
The Growing Support for Staking and Crypto ETFs
The momentum for staking is part of a larger shift in the crypto market, fueled by the Trump administration’s support for digital assets. With the appointment of the first-ever “crypto czar” and the announcement of a Bitcoin strategic reserve, the government’s stance signals a more welcoming approach to the sector. Additionally, the interim chief of the SEC recently stated that there could be a slowdown in rule-making around crypto, potentially paving the way for new innovations in the space.
This shift is evident in the growing number of Ethereum-based ETFs in the US. According to Bloomberg Intelligence, at least nine Ether-based ETFs now exist, collectively managing around $7 billion in assets. The inclusion of staking could make these funds more attractive to investors, especially considering the staking rewards offered by Ethereum.
How Staking Enhances Ethereum’s Value Proposition
Staking allows investors to pledge their crypto holdings to validate transactions on the Ethereum blockchain, in return earning more tokens. Currently, staked Ether offers about 3% annual rewards, with roughly a third of all Ether — valued at around $234 billion — already staked. The ability to incorporate staking rewards into ETFs could offer a differentiated investment strategy, boosting both the appeal of these funds and Ethereum’s broader value proposition.
Vivek Raman, founder and CEO of Etherealize, noted that while staking is a key selling point for Ether, the inability to include staking rewards in ETFs had been a barrier to adoption. Allowing staking within these funds could not only open up new capital flows but also create a unique narrative around Ethereum’s investment potential.
The Broader Impact of Staking on Crypto ETFs
Strah Savic, head of data and analytics at FRNT Financial, echoed the sentiment that staking could make these Ethereum-based ETFs more attractive to a broader range of investors. “Staking and passing the returns on to investors could make these ETFs more attractive and would give a broader range of investors an opportunity to participate in the crypto economy,” Savic explained.
He also pointed out that this shift towards staking for Ethereum ETFs could signal positive developments for other altcoin-based ETFs, such as those focused on Solana and similar tokens that rely on staking. According to Savic, the SEC’s willingness to consider staking in these products suggests an accommodating mindset, potentially benefiting the entire crypto ETF market.
Market Response to the Potential for Staking
Ether’s price has seen a significant decline this year, dropping about 42% compared to Bitcoin’s 11% decline. However, the push for staking could provide a much-needed boost to Ether’s value, as well as to the broader ETF market. The ability to incorporate staking rewards directly into ETFs could attract more institutional and retail investors, further legitimizing the market.
In conclusion, as regulators take a more favorable approach to cryptocurrency ETFs and staking, the market is entering a new era of growth and opportunity. With potential regulatory changes on the horizon, staking could become a key feature of crypto ETFs, driving greater investor interest and increasing the appeal of Ethereum and other blockchain assets in the process.
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