Grayscale Ethereum ETFs Could Earn Staking Rewards: SEC Proposal

Grayscale Ethereum ETFs May Soon Earn Staking Rewards

Grayscale Ethereum ETF– The U.S. Securities and Exchange Commission (SEC) has published a filing from NYSE Arca that proposes allowing Grayscale’s Ethereum exchange-traded funds (ETFs) to participate in Ethereum’s staking process. This rule change, filed on February 14 and acknowledged on February 25, could enable the Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ETF to earn staking rewards while still maintaining custody protections.

According to the filing, Grayscale could stake a portion of the Ethereum held by the Trust through trusted staking providers. These providers may include the current custodian or its affiliates, but notably, Grayscale affiliates will not be involved. Staking involves locking up Ethereum tokens to become co-validators on the network, helping to secure it and earning rewards in return.

The filing emphasizes that Grayscale’s approach is different from “delegated staking” services, which have faced regulatory challenges in the past. Importantly, the Ethereum held by the Trust would remain under custodial control, addressing previous security concerns that hindered approval for similar activities.

Impact on Grayscale’s Crypto ETF Portfolio

This proposal is part of Grayscale’s broader strategy to expand its crypto ETF offerings beyond Bitcoin and Ethereum. The firm has been actively submitting filings for other digital asset ETFs, such as those for XRP, Cardano, and Polkadot, in anticipation of a more favorable regulatory environment under a potentially new SEC leadership.

By allowing the ETFs to stake Ethereum, Grayscale aims to enhance the performance of the funds by capturing staking rewards. However, these rewards would be managed as income for the funds and would not involve pooling the Ethereum with other entities like validators.

SEC Review and Potential Approval

The SEC will have 45 days to review and approve or reject the proposal, with the possibility of extending the review period. If approved, this change would allow Grayscale’s Ethereum ETFs to track Ethereum’s staking rewards more effectively, following Ethereum’s transition to a proof-of-stake system in 2022.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.