(Bloomberg) -- Cboe BZX Exchange Inc. is asking regulators to open the door for staking on a number of Ether-based exchange-traded funds, joining another platform in the race for investors to potentially earn passive income on their crypto holdings.
Cboe’s filing this week with the US Securities and Exchange Commission is appealing for the approval of staking for Fidelity’s Ethereum Fund. The company had previously submitted similar paperwork for the 21Shares Core Ethereum ETF. Another exchange, NYSE Arca Inc., has asked regulators for the staking option on Ethereum products from Grayscale Investments.
Meanwhile, the crypto firm Bitwise is exploring the feasibility of filing for something similar on NYSE.
“ETPs should stake. We’ve seen in Europe that staking ETPs work and help increase investor returns and boost network security,” said Bitwise’s Matt Hougan, whose firm bought an Ethereum staking service at the end of last year. “It’s something we’re working on aggressively” in the US.
The movement to allow staking — a process that involves investors pledging their crypto holdings to help validate transactions on the blockchain, which in turn helps them earn more tokens — is picking up steam as the Trump administration embraces the digital-assets industry and pledges continued support for it.
Many crypto-industry participants are pointing to a number of ventures and proposals — including the appointment of the first-ever crypto czar, as well as the announcement of a Bitcoin strategic reserve, among other things — as signals that President Donald Trump is taking the sector seriously. Meanwhile, the interim chief of the US Securities and Exchange Commission said recently that he expects a slowdown in rule-making around crypto.
This week’s announcement from Cboe helped drive Ether 5% higher to around $1,950. Staked Ether currently earns roughly 3% in annual rewards, according to the site Staking Rewards. About a third of all Ether — which sports a market value of around $234 billion — has been staked, data from Coinbase show.
There are at least nine Ether-based ETFs in the US, according to a tally from Bloomberg Intelligence. The funds, which started to trade last year, collectively command about $7 billion in assets. Staking could help drive new flows toward them, some analysts argue.
Part of Ether’s value proposition is offering a staking yield, said Etherealize founder and CEO Vivek Raman. “But having that differentiating factor but not being able to actually include the staking yield into the ETFs was a potential dampener on the adoption of the ETFs,” he said. Staking “can open up more money, it can open up a differentiated narrative around Ethereum.”
Strah Savic, head of data and analytics at FRNT Financial, agrees that the funds stand to potentially benefit.
“Staking and passing the returns on to investors could make these ETFs more attractive and would give a broader range of investors an opportunity to participate in the crypto economy,” Savic said. “The fact that we are seeing these attempts to allow staking for the ETFs also highlights just how accommodating this SEC is compared to the agency under Gary Gensler’s leadership,” he said, referring to the prior SEC chief.
But it may also portend good news for issuers who have filed for altcoin-based exchange-traded funds centered on tokens such as Solana’s, he said, given that many of them use staking.
“The staking application for ETH is good news for all these prospective crypto ETFs because it signals where the SEC’s mindset is in regards to digital assets,” Savic said. “There is a sense that this SEC is accommodative and willing to let new and innovative products develop at the ETF-crypto nexus. So this is good news for all the crypto ETFs in consideration and additionally so for the ones that have a potential staking component.”
Ether’s price has dropped about 42% so far this year, compared with an 11% decline in crypto-market bellwether Bitcoin.
--With assistance from Olga Kharif.