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.
Grayscale Presses SEC to Permit Ethereum ETF Staking, Highlighting Significant Investor Benefits
Grayscale Investments representatives met with members of the U.S. Securities and Exchange Commission’s Crypto Task Force on April 21 in Washington D.C. to advocate for changes to staking regulations related to Ethereum exchange-traded products (ETPs).
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. Craig Salm, chief legal officer at Grayscale Investments, expressed appreciation for the opportunity to engage with the Securities and Exchange Commission’s Crypto Task Force.
The documents shared during the meeting presented Grayscale’s stance that U.S. Ethereum ETPs collectively oversee $8.1 billion in assets and should stake their holdings, aligning with the practices of non-U.S. counterparts.
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.
An emphasis was placed by Grayscale:
The crypto asset manager highlighted the advantages of staking, explaining that participation strengthens the Ethereum network’s security and delivers additional returns to shareholders. The memorandum stated that, through staking, U.S. investors can benefit from both enhanced network resilience and increased yield. 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.
Grayscale introduced a multi-layered liquidity strategy that includes 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, Grayscale emphasized the need to update regulations to reflect the maturity of the Ethereum ETP market. The document outlined the following:
Currently, spot ETH ETPs do not represent the underlying ETH completely, because they are not currently permitted to engage in staking.
Grayscale noted that non-U.S. markets, particularly in Europe and Canada, had already integrated staking into ETPs successfully, maintaining trading efficiency without compromise. The firm asserted, ‘By leveraging traditional finance models and our experience managing ETPs with similar liquidity challenges, along with our extensive connectivity and partnerships within the digital asset ecosystem, we can stake ETH effectively and responsibly within our ETH ETPs.’ The memorandum also acknowledged potential tax consequences and slashing risks, but emphasized confidence in managing these exposures through operational safeguards and custody arrangements, especially in partnership with Coinbase Custody.
