Ethereum ETFs Could Soon Enable Staking, Indicates SEC Commissioner Peirce
In a recent discussion, US Securities and Exchange Commission (SEC) Commissioner Hester Peirce raised the topic of incorporating staking features into Ethereum ETFs following their anticipated launch, potentially scheduled for July 23.
Initially, ETF providers like VanEck and Fidelity had requested permission to stake the underlying Ethereum assets in their products. However, there are speculations that this requirement was removed in May to secure SEC approval for these index funds.
During an interview, Commissioner Peirce mentioned that features such as staking, which were excluded from approved Bitcoin ETFs, could be reconsidered. While recognizing that her viewpoint may not be shared by other Commissioners, she highlighted the possibility of revisiting the product features of Ethereum ETFs post their trading debut. Peirce stated that elements like staking, or any other product features, are subject to reconsideration.
Expressing disappointment with the challenging approval processes for cryptocurrency ETFs, Peirce emphasized the necessity of a smooth and drama-free product launch, stating that the focus should be on trading and observing market interest.
Staking involves token holders earning rewards by securing their tokens and contributing to blockchain network security. 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. This design aims to deter malicious activities that could jeopardize the network, potentially boosting returns for investors participating in the network’s consensus mechanism.
Institutional investors, retail investors, and asset managers familiar with staking mechanisms may find investing in these ETFs appealing, leading to increased demand and capital inflows into the emerging Ethereum ETF market.
Analysts predict strong demand for Ethereum ETFs in the initial trading months, with projections varying. Fundstrat’s Sean Farrell expects net inflows exceeding $5 billion, while JPMorgan strategists foresee modest net inflows of $1 billion to $3 billion for Ether portfolios. Vetle Lunde, a senior research analyst at K33 Research, anticipates $4 billion net inflows within the first five months, potentially impacting ETH’s price positively.
Despite optimistic forecasts, some analysts, like those at Bernstein, express bearish sentiments regarding the outlook of new Ethereum ETFs due to the absence of staking features compared to spot Bitcoin ETFs.
At the time of writing, Ethereum, the second-largest cryptocurrency, is trading at $3,395, showing a 1.5% decline in the last 24 hours but a 9% increase over the past week.
