According to CoinDesk, institutional investors are not expected to be troubled by the fact that U.S. spot ether exchange-traded funds (ETFs) will not be staking the underlying token to provide additional returns. This is according to Ophelia Snyder, a co-founder of digital asset manager 21Shares. However, retail investors might be interested in having this feature. This difference in demand could create a business opportunity for providers to offer separate, distinct products to cater to both groups.
Spot ether ETFs are expected to be listed in the U.S. soon, following the approval of key regulatory filings by the Securities and Exchange Commission (SEC) last month. Final approvals are anticipated to be completed in the coming months, as stated by SEC Chair Gary Gensler during a budget hearing last week. Prospective providers have omitted staking provisions from their applications to avoid potential regulatory hurdles.
Snyder pointed out that staked assets can impact liquidity. For instance, if the unstaking period for ether extends to 22 days, it could pose challenges. There have been suggestions that the absence of staking might dampen investor interest in ether ETFs. JPMorgan predicted in May that it expects inflows worth $3 billion by the end of 2024, a figure that could double if staking were allowed.
However, Snyder does not believe that the lack of staking is a problem for institutional investors. If it were, they would want to see a history of asset managers effectively managing withdrawal delays due to the inherent risk management it necessitates.
21Shares, one of the existing providers of a spot bitcoin ETF in the U.S. and one of the largest exchange-traded product (ETP) issuers in Europe, is likely to understand the institutional market. The company, which is also applying for a U.S. spot ether ETF that specifically excludes staking as a source of income, has an ether ETP with assets under management of around $532 million.
Snyder also highlighted another issue: the uncertainty of how staking rewards will be treated from a tax perspective in the U.S. She suggested that non-staked products would be 'more digestible' to an institutional audience, even if they're less popular with retail investors.