Staking Sacrificed: BlackRock, Grayscale, Bitwise Amend Spot Ethereum ETF Proposals

full version at beincrypto

A wave of major asset management firms have amended 19b-4 filings with the Securities and Exchange Commission (SEC) for spot Ethereum ETFs. BlackRock, Grayscale, and Bitwise joined the ranks of Fidelity, ARK 21Shares, Invesco Galaxy, VanEck, and Franklin Templeton, who had already made similar amendments.

This move comes amid heightened regulatory scrutiny of the crypto industry and signals a strategic shift to comply with potential SEC concerns.

Asset Managers Adjust Spot Ethereum ETF Strategies

In a May 22 filing from the Nasdaq Stock Market, asset management firm BlackRock amended its spot Ethereum ETF 19b-4 application to exclude staking provisions. Grayscale and Bitwise also filed similar amendments with the New York Stock Exchange (NYSE) Arca.

“Neither the Trust, nor the Sponsor, nor the Ether Custodian, nor any other person associated with the Trust will, directly or indirectly, engage in action where any portion of the Trust’s ETH becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ether or generate income or other earnings,” the amended part reads in all the three filings.

List of Potential Spot Ethereum ETF Issuers. Source: X/JSeyff

Commenting on the asset managers’ amendment spree, Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, said these actions clarified the SEC’s stance on staking for spot Ethereum ETFs.

“Looks like you got a final answer as to whether SEC will allow staking: No. As this is the first amendment of any document to roll in post-SEC 180 and their comments to issuers,” Balchunas said.

The crypto community sees the approval of spot Ethereum ETFs as a bullish sentiment for the broader market. However, approving these ETFs without accommodating staking could disadvantage investors interested in earning additional yield from staking rewards.

Those who purchase, hold, and stake ETH have the opportunity to receive staking rewards, which can result in extra yield. Hence, by excluding the staking aspect, spot Ethereum ETFs will be unable to provide additional benefits for investors.

Meanwhile, several industry experts believe political considerations could influence the approval of spot Ethereum ETFs, especially with the upcoming US presidential election in November. Citing former US president Donald Trump’s move to support the crypto industry, some see this sudden change as “political.”

“I think this decision from above, possibly above the SEC’s head, like Biden, the Biden admin that decided it’s not worth fighting this. We might even lose in court if we try to do this and somebody sues us and we’re losing the votes, people are going to Trump solely because of the stance here, and it’s just not worth it,” Seyffart explained.

Indeed, Presidents Biden and Trump have taken contrasting stances toward the crypto industry. While Biden’s administration has maintained a stringent approach, Trump publicly expressed his comfort with crypto. BeInCrypto previously reported that Trump launched a fundraising page to receive campaign donations in cryptocurrencies, including Bitcoin and Ethereum.

Investors and market watchers will closely monitor the SEC’s decisions and their implications for the crypto market. The balance between regulatory compliance and investor returns remains critical as the industry evolves.