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Staking in Ether (ETH) ETFs May Be a Matter of When, Not If
Eight New Ether Spots Approved (ETH) Exchange-traded funds got off to a flying start intense start after their debut this week, despite the lack of a key feature of Ethereum’s native token: staking income.
While Grayscale Ethereum Trust (ETHE), which existed for years as a non-ETF but was just converted to an ETF, has seen about $811 million in outflows, new products from firms like BlackRock have seen nearly $800 million deposited in the first two days. Issuers say they are happy.
This initial success it wasn’t a givenespecially after several broadcasters announced that I wouldn’t bet the ether for the surrenderwhich they had initially planned to do in previous filings. This was likely because the U.S. Securities and Exchange Commission had asked them to remove the feature since staking could potentially violate federal securities laws as it constitutes unregistered securities offerings, as the SEC had previously argued in other cases.
With a new administration taking office in January, things could change quickly, and issuers remain hopeful that this feature could one day become part of their products.
That said, it’s not “an active discussion” at the moment, Rob Mitchnick, head of digital assets at BlackRock, said in an interview with CoinDesk. He added that the SEC has made its view clear on the matter.
BlackRock, the world’s largest asset manager, initially did not apply to participate in its bid, but others, including Fidelity and Franklin Templeton, did.
“I certainly hope that as an industry we can 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 component of the Ethereum ecosystem in that it’s the asset that secures the ecosystem and so by extension, it’s a big part of the investment experience and the ability to invest in your ether.”
Former President Donald Trump seems to have won the hearts of many crypto industry leaders and is their preferred choice for this year’s election, given his recent support for the industry.
“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 is no doubt that politics are intertwined with the timing of the ‘when.’”
He added: “Indications are that a Trump administration would be much more crypto-friendly, which could certainly accelerate the timeline for when staking could be allowed. Otherwise, ETF issuers could be left waiting for a comprehensive crypto regulatory framework to be put in place, which would likely take much longer.”
For Franklin Templeton, which, like Fidelity, was eager to integrate staking into ETFs, starting without this feature seemed natural and made the overall product approval process easier.
“The simplest path or the path of least resistance was clearly to do it as a non-staked version,” said Christopher Jensen, director of digital asset research for Franklin Templeton’s Digital Asset Investment Strategies Group. “It just works better, it’s simpler, it’s easier, and the execution risk has been lower, so I think it’s very natural that we went there.”
Whether staking will be part of ETFs in the future does not seem to be up to asset managers to decide, but it is a question of whether the regulatory landscape will be open to this possibility in the future.
“I think it’s very much tied to the regulatory clarity that we think will happen over time, whether that happens or not,” said David Mann, head of ETF products and capital markets for Franklin. “That’s the framework we’re dealing with today, and if it evolves, we’ll be ready to evolve with it.”