tl;dr
The Securities and Exchange Commission has acknowledged a filing from NYSE Arca regarding a proposal to allow Grayscale's Ethereum exchange-traded funds to earn staking rewards. The proposal, submitted on February 14 and published by the SEC on February 25, would enable the ETFs to participate in Et...
The Securities and Exchange Commission (SEC) has acknowledged a filing from NYSE Arca proposing that Grayscale's Ethereum exchange-traded funds (ETFs) be allowed to earn staking rewards. This proposal, which was submitted on February 14 and published by the SEC on February 25, would enable the ETFs to participate in Ethereum's proof-of-stake validation system while maintaining custody protections.
Grayscale's approach to staking differs from delegated staking services that have faced regulatory challenges in the past. The proposal specifies that any staked Ethereum managed by Grayscale would remain under custodial control. If approved, this change would help the Grayscale ETFs track returns associated with holding Ethereum more effectively. The SEC will have 45 days to approve, disapprove, or extend its proposal review.
The filing details that the ETFs would stake the Ethereum tokens through trusted providers and earn rewards in the form of additional ETH. However, the staking process itself would be exclusively done by Grayscale, without pooling ETH with other entities such as validators. The proposal also prohibits Grayscale from marketing its staking services and ensures that any staked Ethereum they manage remains under custodial control, addressing security concerns that have previously complicated regulatory approval for such activities.
If approved, this change would help the Grayscale ETFs track returns associated with holding Ethereum more effectively, especially since staking has become an integral feature of Ethereum since its transition to proof-of-stake in 2022 with The Merge. The SEC has 45 days to approve, disapprove, or extend its proposal review, unless it designates a longer period for consideration.