Ethereum
Staking in Ether (ETH) ETFs May Be a Question of When, Not If
Eight new ether spots approved (ETH) Exchange traded funds have seen a busy start after their debut this week, despite lacking a key feature of Ethereum’s native token: staking revenue.
While the Grayscale Ethereum Trust (ETHE), which has existed for years in a non-ETF form but has just been converted to an ETF, has seen about $811 million in outflows, new products like BlackRock have seen nearly $800 million deposited in the first two days. Issuers say they are pleased.
This early success it was not obviousespecially after several transmitters announced that they I wouldn’t bet ether for the yieldwhich they had originally planned to do in previous filings. This was likely because the U.S. Securities and Exchange Commission had asked them to remove the feature, as staking could potentially violate federal securities laws because it constitutes unregistered offerings of securities, as the SEC had previously argued in other cases.
With a new administration taking office in January, things could change quickly, and issuers remain optimistic that this feature could eventually become part of the product offering.
That being said, this is not currently an “active discussion,” Rob Mitchnick, head of digital assets at BlackRock, said in an interview with CoinDesk. He added that the SEC has made its views on the matter clear.
BlackRock, the world’s largest asset manager, did not initially apply to join its bid, but others, including Fidelity and Franklin Templeton, did.
“I really hope that as an industry we’re able to help educate and provide perspective on how we can bring staking capabilities to investors in these products,” said Cynthia Lo Bessette, head of digital asset management at Fidelity. “Staking is a critical part of the Ethereum ecosystem because it’s the activity that secures the ecosystem and therefore, as a result, it’s an important part of the investment experience and the ability to invest in your ether.”
Former President Donald Trump appears to have won the hearts of many crypto industry executives and is their preferred choice in this year’s election, given his recent support for the space.
“I think staking in spot ether ETFs is a question of when, not if,” said Nate Geraci, president of the ETF Store. “That said, there’s no doubt that politics is closely tied to the ‘when.’”
He added: “There is every reason to believe that a Trump administration would be much more supportive of cryptocurrencies, which could certainly speed up the timeline for staking approval. Otherwise, ETF issuers could find themselves waiting for a full regulatory framework for cryptocurrencies to be put in place, which would likely take much longer.”
For Franklin Templeton, which like Fidelity wanted staking to be part of ETFs, starting without the feature felt natural and made the overall product approval process easier.
“The easiest path or the path of least resistance was clearly to do it in an unstaked version,” said Christopher Jensen, director of digital asset research for Franklin Templeton’s Digital Asset Investment Strategies Group. “It works better, it’s simpler, it’s easier and the execution risk was lower, so I think it’s a natural fit that that’s where we started.”
Whether staking will be part of ETFs in the future does not seem to depend on asset managers, but the question is whether the regulatory landscape in the future will be open to it.
“I think it depends a lot on the regulatory clarity that we think will happen over time, whether that happens or not,” said David Mann, head of ETF products and financial markets at Franklin. “That’s the framework we’re facing today and if it evolves, we’ll be ready to evolve with it.”