The Cboe BZX Exchange has proposed adding staking functionality to the 21Shares Core Ethereum ETF, potentially making it the first Ethereum ETF in the U.S. to offer staking benefits if approved by the SEC.
The proposal seeks permission for the ETF to stake Ethereum holdings, enhancing blockchain security while earning rewards for investors. This approach could narrow the gap between holding Ethereum directly and investing through ETFs by providing additional returns.
Why Staking Matters for Ethereum ETFs
Staking allows Ethereum holders to participate in blockchain validation, earning rewards while securing the network. Incorporating staking into an ETF structure could attract both institutional and retail investors by offering passive income, making digital asset investment more appealing.
Staking Integration: A Game-Changer for Crypto ETFs
If approved, the 21Shares Ethereum ETF could inspire similar offerings in the crypto market. Unlike previously approved Ethereum ETFs from companies like BlackRock and Fidelity, this initiative introduces staking rewards, making ETFs more attractive. Additionally, it reflects the growing demand for crypto assets that offer yield opportunities.
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The plan involves staking a portion of the ETF’s Ethereum through third-party providers, avoiding conflicts of interest by excluding affiliated companies. This method could boost investor interest by adding a revenue stream through staking.
Challenges and Opportunities Ahead
The SEC remains cautious due to the Howey Test, which assesses whether staking constitutes a security. However, industry experts anticipate a decision by late October, which could pave the way for more staking-enabled ETFs. Approval could lead to significant market growth, encouraging asset managers to integrate staking into their crypto funds.
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If successful, the move could enhance Ethereum’s value proposition, further driving innovation in the digital asset space.
Approval could mark a significant step in crypto investing, offering additional income opportunities for investors as Ethereum transitions fully to proof-of-stake.
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