Approval for Ethereum ETF staking is being urged by Grayscale, with the aim of unlocking millions in rewards, enhancing the strength of Ethereum’s network, and advancing U.S. crypto investment growth.
A meeting was held by representatives from Grayscale Investments with members of the U.S. Securities and Exchange Commission’s Crypto Task Force on April 21 in Washington D.C., where advocacy for changes to staking regulations related to Ethereum exchange-traded products (ETPs) was presented.
In a memorandum summarizing the meeting, a detailed request was provided by Grayscale to amend its Form 19b-4 filings for the Grayscale Ethereum Trust ETF (ETHE) and the Grayscale Ethereum Mini Trust ETF (ETH), with the goal of allowing staking activities. Appreciation for the opportunity to engage with the Securities and Exchange Commission’s Crypto Task Force was expressed by Craig Salm, chief legal officer at Grayscale Investments.
The documents shared during the meeting presented Grayscale’s stance that U.S. Ethereum ETPs, which collectively oversee $8.1 billion in assets, should be permitted to stake their holdings, aligning with practices of non-U.S. counterparts. An emphasis was placed by Grayscale:
ETH ETPs have foregone approximately $61 million as a result of not being able to participate in staking from launch through February 2025, not including daily compounding of rewards. Instead, such rewards have gone to non-US ETH ETPs and other non-ETP stakers.
The advantages of staking were highlighted by the crypto asset manager, with an explanation that participation would enhance the Ethereum network’s security while providing added returns to shareholders. It was stated in the memorandum that through staking, U.S. ETH ETPs would take part in validating transactions on the Ethereum network, contribute to the blockchain’s security and efficiency, and in return, receive ETH rewards.
Additionally, a multi-layered liquidity strategy was introduced by Grayscale, incorporating a “Liquidity Sleeve,” short-term financing arrangements with custodians and liquidity providers, and a revolving credit facility designed to reduce redemption risks during unstaking periods.
In its conclusion, the need to update regulations to align with the maturity of the Ethereum ETP market was emphasized by Grayscale. It was outlined in the document:
Currently, spot ETH ETPs do not represent the underlying ETH completely, because they are not currently permitted to engage in staking.
It was further observed that staking had already been successfully incorporated into ETPs in non-U.S. markets, particularly in Europe and Canada, without negatively impacting trading efficiency. It was asserted by Grayscale: “By leveraging traditional finance models and experience managing ETPs with similar liquidity challenges, along with Grayscale’s extensive connectivity and partnerships within the digital asset ecosystem, ETH can be staked effectively and responsibly within our ETH ETPs.” As a broader point, the memorandum acknowledged potential tax consequences and slashing risks but conveyed confidence that such exposures would be managed through operational safeguards and custody arrangements, especially in partnership with Coinbase Custody.
