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The proposed rule change could potentially make 21Shares the first U.S. spot ETH ETF to offer staking rewards.
Cboe BZX Proposes Rule Change
Cboe BZX Exchange has submitted a rule change proposal to the U.S. Securities and Exchange Commission (SEC) to incorporate staking into the 21Shares Core Ethereum (ETH) ETF. The request, filed under Form 19b-4, marks a potential milestone in the U.S. ETF landscape by introducing staking as a feature in a spot Ethereum ETF.
If approved, the 21Shares Core Ethereum ETF will allocate a portion of its Ethereum holdings for staking, allowing investors to earn staking rewards. The move positions 21Shares as the first issuer to formally propose a staking-enabled Ethereum ETF in the United States.
Staking and Its Implications
Staking involves locking up Ethereum to help secure the blockchain while generating passive income. Unlike simply holding ETH ETFs, staking enables investors to gain additional returns. The filing indicates that Cboe BZX plans to use a "point-and-click" staking method, ensuring that the ETH remains in place rather than being transferred, reducing the risk of theft.
Cboe stated in the filing,

“Based on discussions with the Sponsor, the Exchange proposes to amend several portions of the ETH ETP Amendment No. 2, as amended, in order to allow the staking of the Ethereum held by the Trust.”

Regulatory Challenges
Despite its certification last year, the 21Shares Core Ethereum ETF did not include staking due to regulatory concerns. The SEC has historically been cautious regarding staking in ETFs, citing potential securities law violations. However, recent shifts in leadership at the SEC have renewed investor optimism that the regulator may reconsider its stance on staking in ETF products. The SEC now has 240 days to issue a decision on the proposal.
Market Impact
While the proposal seeks to introduce staking, the filing also ensures that adequate liquidity will be maintained to meet redemption demands. Market reactions have been positive, with Ethereum recovering from a recent dip following the announcement. The cryptocurrency, which traded as low as $2,551.17 in the past 24 hours, climbed to $2,794.86, reflecting a 4.73% increase.
Potential Long-Term Effects
The integration of staking into Ethereum ETFs could drive increased institutional interest and investment in Ethereum. Analysts speculate that if approved, this change could strengthen Ethereum’s long-term investment case. Despite Ethereum struggling to breach the $4,000 resistance level in this bull cycle, the staking proposal has reinvigorated market sentiment, with some projections suggesting a potential rally toward $10,000 in the future.
The SEC’s decision on this proposal will be closely monitored, as it could set a precedent for other ETF issuers looking to integrate staking into their offerings.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
