BlackRock Moves to Integrate Ethereum Staking into Institutional Offerings

• BlackRock registered the iShares Staked Ethereum Trust in Delaware,

• SEC acknowledgment of Nasdaq’s plan to add staking to BlackRock’s existing ETH ETF would let the fund stake held ETH and pass rewards directly to investors once fully approved

BlackRock has registered its iShares Staked Ethereum Trust in Delaware, an important step forward for staking-type crypto investment products. Bloomberg analyst Eric Balchunas noted that the registration could soon lead to a formal filing under the Securities Act of 1933. BlackRock has previously gone through the same process for both its spot Bitcoin and Ethereum exchange-traded funds, both of which generated significant investor interest once the SEC recognized them.

The​‍​‌‍​‍‌​‍​‌‍​‍‌ recent development comes shortly after the Securities and Exchange Commission acknowledged Nasdaq’s proposal to add staking functionality to BlackRock’s already existing Ethereum ETF structure. The regulator did not give a final approval in September, but allowed the process to go on as the regulatory frameworks for digital assets are changing. In fact, by allowing the fund to do so, BlackRock will be able to stake the Ethereum that the fund holds, thus earning on-chain rewards that would be given directly to the ​‍​‌‍​‍‌​‍​‌‍​‍‌investors. 

The​‍​‌‍​‍‌​‍​‌‍​‍‌ regulatory push goes hand-in-hand with the SEC’s decision to remove the 19b-4 filing requirement for crypto exchange-traded products that comply with new listing standards. The change may speed up the green lights that are needed for the launch of financial products related to staking, thus allowing a wider audience to access the Ethereum-based yield through conventional investment vehicles. In this regard, BlackRock’s Head of Digital Assets, Robert Mitchnick, referred to staking sanctions as the subsequent natural step of Ethereum ETF ​‍​‌‍​‍‌​‍​‌‍​‍‌evolution.

Market Reflects Rising Demand for Staking Exposure

These​‍​‌‍​‍‌​‍​‌‍​‍‌ competitors, including 21Shares, Fidelity, and Franklin Templeton, have already taken a step ahead by submitting similar filings for the introduction of staking features in their Ethereum ETFs. To capture the staking market, independent issuers have released a dedicated staking ETF, such as REX-Osprey’s ETH + Staking ETF; however, the total assets of this ETF are only around $2.4 million.

In contrast, Grayscale has staked 32,000 ETH in its Ethereum funds, thus leading the way for institutional investors to follow suit. BlackRock’s Ethereum ETF (ETHA) is still the biggest one, with a management volume of over $11.5 billion, but due to market volatility, there have been significant withdrawals, almost $200 million, yesterday. 

By staking, which is the act of locking ETH from the circulation while still allowing the holders to get a return, Ethereum is gradually changing its economic model. However, it also poses some regulatory and operational challenges that asset managers, who are in the crypto space, have to deal with as the market is ​‍​‌‍​‍‌​‍​‌‍​‍‌evolving.

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