SEC Begins Review of BlackRock’s Ethereum ETF Staking Proposal

By: Eva Baxter

In a significant move, the US Securities and Exchange Commission (SEC) has acknowledged a proposal by Nasdaq to amend BlackRock's iShares Ethereum Trust (ETHA) to incorporate staking. This amendment seeks to allow the ETF to utilize its Ethereum holdings to participate in Ethereum's proof-of-stake chain validation process. The introduction of this 'staking' feature would enable BlackRock to stake some or all of ETHA’s Ethereum either directly or through trusted staking providers, potentially generating additional income from staking rewards which would be payable back to the ETF.

The proposal, initially filed by Nasdaq on July 16, aims to align the product more closely with the returns experienced by individual Ether holders and improve the efficiency of creation and redemption processes for investors. This change is seen as part of a competitive race among financial giants to include staking within their Ethereum ETF offerings, following the SEC's clarification on staking activities in May, which stated that such activities do not require registration as securities transactions. Notable firms, including Cboe, NYSE Arca, and others, are also seeking similar amendments for their respective Ethereum-related funds.

As the proposal moves forward, the SEC will provide a period of 45 days, which is extendable up to 90 days, after its publication in the Federal Register to either approve, disapprove, or commence proceedings on the Nasdaq filing. The regulator is also welcoming public commentary on the proposed changes. This decision is keenly awaited, given the broader implications it may have for the crypto and financial sectors in integrating staking mechanisms into structured financial products.

The development follows a broader trend of integrating cryptocurrency staking into financial products, signaling a step towards more complex crypto financial services. Stakeholders, including investors and crypto enthusiasts, are closely watching the SEC's next move, given its potential to shape the future of crypto ETFs and impact the existing dynamics of the cryptocurrency market. As the decision deadline approaches, both anticipation and competition in the sector are set to escalate.