Just In: Bitwise Files Proposal To Enable Staking on Ethereum ETF

The New York Stock Exchange (NYSE) has proposed amendments that will create staking rewards on an Ethereum-based exchange-traded fund (ETF). The proposal seeks to list and trade shares of the Bitwise Ethereum ETF with staking capabilities, marking an advancement in cryptocurrency-related financial instruments. If passed, the ETF would open an opportunity for investors to obtain staking rewards without directly owning crypto.

Bitwise Proposes Ethereum ETF with Staking

In a recent filing with the U.S. SEC, Bitwise has requested approval to launch an Ethereum ETF that incorporates staking. Under the 19b-4 rule change filing, this proposal attempts to amend NYSE regulations to facilitate the listing and trading shares in this ETF.

Staking is a process that allows a user to lock his or her cryptocurrency in order to validate blockchain transactions and earning additional tokens as rewards. At present, staking is mostly viable for those who want to hold and manage digital assets directly. Staking within an ETF would introduce another access channel to a regulated financial instrument.

Notably, Bitwise has been expanding its presence in ETFs with its latest fund designed to track corporate Bitcoin holders. The launched OWNB ETF will monitor companies holding at least 1,000 BTC in their corporate treasuries, offering investors indirect exposure to Bitcoin.

Regulatory Review and SEC Considerations

Before approving the application, the SEC is expected to conduct a thorough scrutiny of Bitwise’s proposal. The agency has had such concerns towards cryptocurrency financial products in relation to investors, fraud and stability of the market.

Authorities will focus on how the staking proceeds are set up in the ETF, arrangements of the properties’ custody, and distribution plans. More so, the SEC will access whether the creation of staking in an ETF format poses new risks in the financial market.  While the proposal could expand investment options, approval is not guaranteed.

BlackRock Acknowledges Limitations of ETH ETF Without Staking

In a speech at the Digital Asset Summit, BlackRock’s head of digital assets, Robbie Mitchnick, called the Ethereum ETF a “tremendous success.” However, he noted the absence of staking as a key drawback. He emphasized that staking yields are a crucial component of generating investment returns in the Ethereum ecosystem. Even though staking was left out of the initial ETF launch, Mitchnick said adding it could boost investor engagement.

Despite the potential benefits, Mitchnick acknowledged that incorporating staking into Ethereum ETFs presents regulatory and structural challenges. He noted that the process is complex and requires more than just regulatory approval. 

The Bitwise Ethereum ETF, when approved, would be the first that is connected with staking in the United States. This will create space for others to come up with similar products boosting institutional investment in Ethereum. However, the decision lies with the US SEC which is considering the risks and opportunities of crypto-based ETFs.