Author: Helene Braun, CoinDesk; Translated by: Wuzhu, Golden Finance
A spot Ethereum exchange-traded fund was successfully launched in the United States on Tuesday, but regulators do not allow the ETF to generate returns for investors by staking ETH.
This practice has disadvantages compared to directly holding cryptocurrencies, but issuers hope that regulators will eventually allow staking.
Eight newly approved spot Ethereum (ETH) exchange-traded funds debuted this week, and got off to a flying start despite lacking a key feature of Ethereum’s native token: staking income.
While the Grayscale Ethereum Trust (ETHE), which has existed in non-ETF form for years but just converted to an ETF, saw outflows of about $811 million, new products from companies like BlackRock attracted nearly $800 million in deposits in the first two days. Issuers say they are happy with this.
This early success is not to be taken for granted, especially after several issuers announced that they would not stake Ethereum for yield, something they had initially planned to do in earlier filings. This was likely because the SEC required them to remove the feature, as staking could violate federal securities laws because it constitutes an unregistered securities offering, as the SEC has previously said in other cases.
While the situation could change quickly with a new administration taking office in January, issuers remain hopeful that the feature will eventually become part of the product.
That said, Rob Mitchnick, BlackRock’s head of digital assets, told CoinDesk that there are “no active discussions taking place yet.” He added that the SEC’s view on this is clear.
BlackRock, the world's largest asset manager, did not initially apply for the pledge, but others including Fidelity and Franklin Templeton did.
“I certainly hope that as an industry we can help educate investors 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 an important part of the Ethereum ecosystem because it’s the activity that secures the ecosystem, and therefore, it’s an important part of the investing experience and investing in Ethereum.”
Former President Donald Trump appears to have won the hearts and minds of many leaders in the crypto industry, making him their top choice in this year’s election given his recent support for the space.
“I think staking in a spot Ethereum ETF is a matter of when, not if,” said Nate Geraci, president of the ETF Store. “That being said, there is no doubt that politics are intertwined with the timing of ‘when.’”
He added: “There are signs that the Trump administration will be more supportive of crypto, which would certainly accelerate the timeline for allowing staking. Otherwise, ETF issuers may wait for a comprehensive crypto regulatory framework to be in place, which could take longer.”
For Franklin Templeton, who shared Fidelity’s enthusiasm for staking as part of ETFs, it seemed natural to start without this feature, making the overall process of getting the product approved easier.
“Obviously the easier or path of least resistance is to do it as a non-collateralized version,” said Christopher Jensen, head of digital asset research at Franklin Templeton Digital Asset Investment Strategy Group. “It works better, it’s simpler, it’s easier, it has less execution risk, so I think it’s only natural that we start there.”
Whether staking will become part of ETFs in the future does not seem to depend on asset managers, but on whether the future regulatory environment will accept it.
“I think this is very much tied to the regulatory clarity that we think will come over time," said David Mann, head of ETF product and capital markets at Franklin. “This is the framework we’re dealing with today, and if it evolves, we’ll be ready to evolve with it.”
