Grayscale Investments, a leading digital asset management firm, is exploring the addition of staking functionality to its proposed spot Ethereum exchange-traded fund (ETF), as revealed in a preliminary proxy statement filed on Tuesday.
In the statement, Grayscale outlined four key items for consideration by investors, including the implementation of a creation and redemption process involving cash and the integration of staking capabilities for Ethereum within the trust.
According to Grayscale, enabling the trust to engage in Ethereum staking would serve to alleviate inflationary pressures resulting from Ethereum’s proof-of-stake protocol. This move aims to safeguard the value of the Trust Estate for the ultimate benefit of ETHE’s shareholders and ensure parity with similar investment products offering staking features.
Grayscale’s initiative follows in the footsteps of other financial institutions seeking approval for spot ether ETFs, with Fidelity recently amending its application to incorporate staking provisions for Ethereum.
Grayscale initially filed a Form 19b-4 alongside NYSE Arca in October to convert the Grayscale Ethereum trust into a spot ether ETF. The company had previously achieved success in converting its Grayscale Bitcoin trust into a spot bitcoin ETF following regulatory approval in January, after a legal battle and subsequent SEC endorsement.
Despite the SEC’s approval of spot bitcoin ETFs earlier this year, the outlook for ether-backed products remains uncertain. Bloomberg ETF analyst James Seyffart expressed skepticism, anticipating a rejection of spot ether ETFs by May 23.
“My cautiously optimistic attitude for ETH ETFs has changed from recent months,” Seyffart commented. “We now believe these will ultimately be denied May 23rd for this round. The SEC hasn’t engaged with issuers on Ethereum specifics. Exact opposite of #Bitcoin ETFs this fall.”
Grayscale’s exploration of staking integration underscores the evolving landscape of cryptocurrency investment products and the ongoing efforts to navigate regulatory challenges in the industry.