The New York Stock Exchange (NYSE) has submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to integrate staking into Bitwise Ethereum exchange-traded funds (ETFs). This move could redefine how Ethereum ETFs operate and appeal to investors seeking staking rewards.

Proposal to Integrate Ethereum Staking

According to a filing with the SEC on March 20, the NYSE seeks regulatory approval to introduce staking into the ETF structure. This amendment would allow the fund to stake a portion of its Ethereum (ETH) using a technique called “point-and-click” staking. This method ensures that the staked ETH remains in the wallet, reducing security risks while maintaining control of assets.

Ethereum ETFs: Current Performance and Challenges

Ethereum ETFs launched in July 2024, but they have struggled to match the popularity of Bitcoin ETFs. As of March 20, Ethereum ETFs recorded a total of $6.79 billion in net assets, yet they experienced $84 million in cumulative outflows over the previous week. In comparison, spot Bitcoin ETFs have amassed $94.47 billion in total net assets.

Robbie Mitchnick, head of digital assets at BlackRock, addressed this disparity at the Digital Asset Summit on March 20. He emphasized that Ethereum ETFs lack the attraction of staking rewards, which are a core feature of Ethereum’s proof-of-stake model. Mitchnick suggested that enabling staking within ETFs could significantly boost their appeal and attract more investors to Ethereum-focused funds.

The Role of Staking in Ethereum

Staking became a key feature of Ethereum after its transition to a proof-of-stake consensus mechanism in 2022. This process allows ETH holders to lock up their tokens and earn rewards, with annual yields typically ranging from 2% to 7%. As of now, ETH staking deposits have surpassed 33 million ETH, representing 27% of the total circulating supply.

Benefits of Staking for ETFs

If Ethereum ETFs are permitted to stake, it could enhance their market appeal and performance. Institutional investors may be drawn to the opportunity to earn staking rewards, which could lead to increased demand for ETH. This shift might also stabilize Ethereum’s price, which has dropped 47% from its December high of $4,105 to $1,990.

Potential Market Impact

In addition to ETFs, staking could play a crucial role in improving Ethereum’s market performance. With more institutional investors entering the space, the demand for ETH could rise, potentially reversing its recent price decline and strengthening its position in the cryptocurrency market.

As the proposal awaits approval, the integration of staking into Ethereum ETFs represents a significant step in bridging traditional finance and blockchain technology. Investors interested in cryptocurrencies and ETFs should monitor this development closely, as it may unlock new opportunities in Ethereum investment.

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