According to Bloomberg, Ether spot ETF issuers, including Fidelity and Ark Investment, have made a crucial change by canceling the staking plan for purchasing Ether (ETH) in their proposed funds. Industry experts believe that this move will benefit the Ethereum blockchain, but at the same time, it will put these anticipated ETF products at a disadvantage.
Staking has been a hot topic for Ether, as it allows holders to earn returns, which has raised questions about whether this token should be considered a security and fall under US regulatory oversight. Some market participants believe that if Ether spot ETFs do not stake their Ether, these funds will be less attractive to investors compared to directly buying Ether in the cryptocurrency market, as investors who hold Ether can freely stake their tokens.
Brian Rudick, Senior Strategist at digital asset firm GSR, stated that the cancellation of the staking plan for ETFs is not surprising to many observers, as regulatory authorities consider Ethereum’s fundamental mechanism similar to cryptographic lending. Last February, cryptocurrency exchange Kraken agreed to pay a $30 million fine to the US Securities and Exchange Commission (SEC) to settle charges of violating regulations by offering a “staking-as-a-service” product.
Ayesha Kiani, Chief Operating Officer of cryptocurrency hedge fund MNNC Group, stated that currently, staking is more seen as a security because staked Ether provides returns, “This is the best example of the intertwining of decentralization and SEC standards.” She added that holding Ether without staking means that the holders are not helping protect the blockchain, which is a problem because it would have given institutions like Fidelity or VanEck the opportunity to contribute to the Ethereum network.
While many industry advocates believe that ETF issuers canceling the staking plan actually has a net positive effect on the blockchain industry, as the industry’s goal is to establish a decentralized financial system rather than relying on a few intermediaries.
Leo Mizuhara, Founder of decentralized financial institution asset management company Hashnote, stated that in protocols like Ethereum, centralized power can also become an unstable factor when the system encounters problems. Therefore, he believes that not staking such ETFs is beneficial and contributes to stability.
Rudick from GSR stated that ETF issuers not staking Ether may align with Ethereum’s goals and help protect the second-largest cryptocurrency from “long-term institutional takeover.”
Further regulatory clarity may prompt the implementation of ETF staking plans.
Some are concerned that if Ether spot ETFs are approved and become as successful as Bitcoin ETFs (which have attracted around $13 billion in net inflows so far), this would lead to issuers accumulating a significant amount of Ether. If they do not stake these Ether tokens, it could make the Ethereum network more vulnerable to attacks. According to data from Nansen, currently about 27% of circulating Ether is staked.
However, some individuals expect ETF issuers to eventually receive clear approval from regulatory authorities to stake Ether. Ryan Watkins, Co-founder of Syncracy Capital, stated that recent regulatory developments have made the market more optimistic about the SEC approving Ether spot ETFs, as Ether’s price has rebounded by about 20% in the past three days.
The SEC’s “final decision day” for VanEck’s Ether spot ETF application is set for May 23. Eric Balchunas, a senior ETF analyst at Bloomberg, earlier speculated on the X platform that the SEC would release news about Ether spot ETFs around 4 p.m. Eastern Time on Thursday.
Related reports: “VanEck’s proposed Ether spot ETF listed on DTCC with stock code ETHV” and “Approval of Ether ETF expected to drive open interest in futures contracts to a record $14 billion.”
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