In a recent interview, Hester Peirce, a Commissioner at the US Securities and Exchange Commission (SEC), mentioned the possibility of incorporating staking features into Ethereum ETFs (exchange-traded funds) after they launch, expectedly on July 23. Initially, ETF issuers like VanEck and Fidelity had requested approval to stake the underlying Ethereum in their products. However, it is believed they removed this feature as one of the SEC’s requirements for approving these index funds back in May.
Reintroduction Of Staking In Ethereum ETFs?
In the interview, Commissioner Peirce indicated that features such as staking, excluded from approved Bitcoin ETFs, could be reconsidered. While recognizing that other Commissioners might not share her view, she highlighted the potential for revisiting the features of Ethereum ETFs post their trading commencement. Peirce mentioned:
“I think certainly something like staking, or any feature of the product – we saw that on the Bitcoin exchange traded products too, right? There were features of the product that some people would have liked to see included but weren’t – those are always open for reconsideration as far as I’m concerned.”
Peirce also expressed dissatisfaction with the increasingly complex cryptocurrency approval processes for both Bitcoin and Ethereum ETFs applications and emphasized the importance of a smooth and drama-free product launch:
“We shouldn’t strive to have drama around the launch of products like this. It should just be, you know, they get to trade, and we’ll see whether people want to buy them or not, and that should be how it plays out.”
Potential Benefits Of Staking And ETFs
Staking involves token holders earning rewards by securing their tokens and contributing to the security of a blockchain network. In Ethereum’s staking process, validators lock up increments of 32 ETH to activate validators responsible for data storage, transaction processing, and adding new blocks to the blockchain.
By design, the requirement for validators to secure and operate with staked tokens discourages malicious behavior that could compromise the network. Including staking would enhance return potential, enabling investors to be rewarded for participating in the network’s consensus mechanism.
Institutional investors, retail investors, and asset managers familiar with staking may find investing in these ETFs attractive, potentially leading to increased demand and funds flowing into the new Ethereum ETF market.
Despite the absence of staking features in the Ethereum ETF market, analysts foresee strong demand for Ethereum ETFs initially, with some exceptions.
Mixed Predictions
Some experts anticipate significant net inflows into Ethereum ETFs during the initial months of trading. However, others are less optimistic due to factors like the absence of staking features, which may impact demand compared to Bitcoin ETFs.
At the time of writing, Ethereum, the second-largest cryptocurrency, is trading at $3,395, down over 1.5% in the past 24 hours but up 9% over the past week.
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