In response to a February 12 filing with the US Securities and Trade Fee (SEC), the Cboe BZX Trade has submitted a request in search of approval for staking inside the 21Shares Ethereum (ETH) exchange-traded fund (ETF).
Cboe Seeks Ethereum ETF Staking Approval
The Cboe BZX Trade has filed with the SEC to permit ETH held within the 21Shares Core Ethereum ETF to be staked. If authorised, the ETF will be capable of stake its ETH holdings, enabling traders to earn staking rewards on their Ethereum holdings.
For the uninitiated, staking is likely one of the cornerstones of the Ethereum protocol. The blockchain transitioned from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) system in September 2022. Underneath the PoS mannequin, community individuals can stake their ETH to validate transactions and earn rewards in return.
Whereas the SEC authorised its first Ethereum ETF in 2024, it explicitly prohibited staking on the time, citing potential violations of federal securities legal guidelines. This restriction led main cryptocurrency exchanges reminiscent of Coinbase and Kraken to discontinue their staking providers for US clients.
Nevertheless, the SEC’s stance could also be shifting following Donald Trump’s victory within the 2024 US presidential election. The company now has new management, reportedly consisting of extra pro-crypto officers.
That is in stark distinction to the earlier administration underneath former SEC Chair Gary Gensler. The brand new management change seemingly inspired the Cboe BZX Trade to submit its request for Ethereum ETF staking providers.
In its utility, the Cboe BZX Trade has proposed utilizing a “point-and-click” staking mechanism. This staking technique differs from the extra conventional ones in that it doesn’t require ETH to be moved to 3rd events for staking. Fairly, it allows the ETF to stake its ETH holdings immediately from its custody pockets.
Whereas the point-and-click staking mechanism reduces the probability of any safety compromise or breach, it doesn’t utterly take away potential slashing penalties. To elaborate, slashing penalties are imposed on validators who violate community guidelines, resulting in partial or full forfeiture of their staked ETH.
To strengthen its case, the Cboe BZX Trade argued that prohibiting staking for the 21Shares Ethereum ETF is akin to stopping an fairness ETF from distributing dividends to its traders. The agency contends that staking rewards ought to be handled equally to dividends, as they characterize a further yield generated from holding the asset.
ETH Value Reacts To Staking Information
Following the Cboe BZX Trade’s submitting with the SEC, ETH skilled a pointy worth increase. The second-largest cryptocurrency by market capitalization surged from $2,547 to a excessive of $2,795 earlier than stabilizing.
Equally, ETH staking-related tokens, reminiscent of Lido (LDO), skilled a notable worth rally. LDO surged from $1.46 to a peak of $1.84 earlier than retracing to its present worth of $1.66 on the time of writing. At press time, ETH trades at $2,633, up 2.3% previously 24 hours.
Featured Picture from Unsplash.com, Charts from Cboe and TradingView.com
