Grayscale Adds ETH Staking to Its Ethereum ETF Application

Grayscale argued the benefits of being able to “stake the Ethereum held by the Trust” in a new SEC filing yesterday. The firm is hoping to convert its Grayscale Ethereum Trust (ETHE) into an ETH spot ETF the way it did its Grayscale Bitcoin Trust in January.

The proposal, which appeared yesterday in a preliminary proxy statement, outlines four proposals aimed at converting its Grayscale Ethereum Trust (ETHE) into an ETF. Besides using the ETH backing shares to participate in staking through a Proof-of-Stake protocol, the firm also is seeking to grant authorized participants the ability to create and redeem shares, allow Grayscale to assess its fee daily instead of monthly, and bring in a third party custodian who could create and redeem shares with an omnibus account.

Brokerages use omnibus accounts to pool funds and execute trades on behalf of their clients. But because the account doesn’t belong just to any one of those clients, it obscures the identity of the investor.

Michael Sonnenshein, CEO of Grayscale, expressed optimism about the amendments, stating they aim to modernize and simplify ETHE shares for shareholders. This move mirrors a similar application by Fidelity Investments, signaling a growing interest in Ethereum-based ETFs with staking capabilities.

“In consideration for any staking activity in which the Fund may engage, the Fund would receive certain network rewards of ether tokens, which may be treated as income to the Fund as compensation for services provided,” Fidelity wrote in an amendment filed earlier this week.

However, the future of spot ether ETFs appears bleak as Bloomberg ETF analysts predict the U.S. Securities and Exchange Commission (SEC) may reject all pending applications. This skepticism is fueled by the SEC’s distinct classification of digital assets, where Chairman Gary Gensler has identified Bitcoin as the sole commodity, leaving Ethereum’s status ambiguous.

The cryptocurrency community remains hopeful, as the approval of Ethereum ETFs could potentially replicate the positive market impact observed with Bitcoin ETFs, despite regulatory hurdles.

ETF or no, the Ethereum price is struggling to gain any ground today. At the time of writing, Ethereum is trading for $3,283.72— a 1.6% gain from yesterday and a 19% drop compared to this time last week, according to CoinGecko data.