TL;DR
- Cboe files for SEC approval to allow staking in the 21Shares Ethereum ETF, potentially transforming the regulated crypto market and increasing investor interest.
- Staking would generate additional income for ETF investors, aligning returns with Ethereum’s mechanism and making crypto ETFs more attractive to institutional players.
- The new leadership at the SEC could ease approval, with key figures like Commissioner Hester Peirce supporting crypto ETF innovation and regulatory flexibility in the sector.
Cboe BZX Exchange has filed a request with the U.S. Securities and Exchange Commission (SEC) to enable staking in the 21Shares Ethereum ETF. If approved, this move could represent a turning point in the regulation of crypto assets, allowing ETF investors to earn staking rewards within a regulated framework.
Staking is a vital process within Ethereum’s proof-of-stake (PoS) consensus, where participants lock up ETH to validate transactions and earn rewards. However, although the SEC approved several Ethereum ETFs in 2024, it explicitly prohibited staking, citing concerns that it could violate federal securities laws. The regulator expressed that staking might resemble unregistered securities offerings, leading to legal actions against platforms like Coinbase and Kraken.
Why Is This Proposal Significant?
Cboe’s proposal is not just a small tweak in the rules; it’s a groundbreaking solution. The exchange intends to use a “non-transferable staking” model, meaning the Ethereum would not be transferred to third parties but would remain in custody, reducing the risk of theft and slashing penalties. This approach has been praised as a way to mitigate regulatory risks while providing a path for crypto-based financial products to offer passive income to their users without violating current regulations.
This model has been hailed as a potential framework for future crypto asset-backed financial products, offering a unique solution that could allow staking rewards to coexist with existing regulatory structures.
The Future of Staking in Crypto ETFs
This marks the first time a U.S.-listed crypto ETF has requested staking privileges, and it has generated considerable excitement. Analysts like James Seyffart from Bloomberg predict that if the SEC acknowledges the filing, the final decision could come by October of this year. The SEC’s leadership change under the Trump administration has created a more favorable environment for crypto innovation, boosting hopes that this filing will be approved.
With Commissioner Hester Peirce advocating for changes in the regulation of crypto ETFs, the outlook is more optimistic. If the SEC approves this move, it would not only be a significant milestone for Ethereum but also for institutional adoption of crypto assets, solidifying Ethereum’s position as a key player in both decentralized and traditional finance.
This shift could set an important precedent for other funds looking to integrate staking rewards, benefiting investors and strengthening Ethereum’s role in decentralized finance markets.
