According to Bloomberg, Ethereum spot ETF issuers, including Fidelity and Ark Investment, have made a crucial change by canceling the staking plan for purchasing Ethereum (ETH) in their proposed funds. Industry experts believe that this move will benefit the Ethereum blockchain but also put these anticipated ETF products at a disadvantage.
Staking has been a hot topic for Ethereum as it allows holders to earn profits, which has raised the question of whether these tokens should be considered securities and fall under US regulatory oversight. Some market participants believe that if Ethereum spot ETFs do not stake their Ethereum, these funds will be less attractive to investors compared to buying Ethereum directly in the cryptocurrency market, as investors who hold Ethereum can freely stake their tokens.
Brian Rudick, a senior strategist at digital asset firm GSR, stated that the cancellation of the ETF staking plan is not surprising to many observers since regulators view Ethereum’s underlying mechanism as similar to crypto lending. Last February, cryptocurrency exchange Kraken agreed to pay a $30 million fine to the US Securities and Exchange Commission (SEC) to settle charges of violating regulations by offering a “staking as a service” product.
Ayesha Kiani, Chief Operating Officer of cryptocurrency hedge fund MNNC Group, stated that currently, staking is more seen as a security because staked Ethereum provides income, “This is the best example of the intertwining of decentralization and SEC standards.” She added that holding Ethereum without staking means that holders do not contribute to protecting the blockchain, “This is a problem because it would have allowed institutions like Fidelity or VanEck to contribute to the Ethereum network.”
Furthermore, many industry advocates believe that ETF issuers canceling the staking plan is actually a net positive for the blockchain industry, as its goal is to establish a decentralized financial system rather than relying on a few intermediaries. Leo Mizuhara, founder of decentralized financial institution asset management company Hashnote, stated that in protocols like Ethereum, centralized power can also become an unstable factor when the system encounters problems, so he believes that not staking such ETFs is beneficial and contributes to stability.
Rudick from GSR mentioned that ETF issuers not staking Ethereum may align with Ethereum’s goals and help protect the second-largest cryptocurrency from “long-term institutional takeover.”
Further clarity in regulations may prompt the implementation of ETF staking plans
Some are concerned that if Ethereum spot ETFs are approved and achieve the same success as Bitcoin ETFs (which have attracted around $13 billion in net inflows so far), it would result in issuers accumulating a staggering amount of Ethereum. If they do not stake these Ethereum holdings, it may make the Ethereum network more susceptible to attacks. According to data from Nansen, approximately 27% of circulating Ethereum is currently staked.
However, some experts expect ETF issuers to eventually receive clear approval from regulatory authorities to stake Ethereum. Ryan Watkins, co-founder of Syncracy Capital, stated that recent regulatory developments have made the market increasingly optimistic about the SEC approving Ethereum spot ETFs, and Ethereum prices have rebounded by about 20% in the past three days.
The SEC’s “final decision date” for VanEck’s Ethereum spot ETF application is set for May 23. Eric Balchunas, a senior ETF analyst at Bloomberg, recently stated on the X platform that he speculated the SEC would release news regarding Ethereum spot ETFs around 4 pm Eastern Time on Thursday.
Related reports: “VanEck’s pending Ethereum spot ETF listed on DTCC with ticker symbol ETHV” and “Approval of Ethereum ETF expected to drive open interest in futures to a record $14 billion”.
