Ethereum
Staking ban could erode Ethereum ETF’s appeal: Bloomberg
Propose Ethereum Spot ETFCompanies face hurdles as issuers including Fidelity and Ark Investment abandon staking plans. The move, driven by regulatory concerns, could diminish the appeal of these funds compared to direct investments in Ether, which offer staking rewards.
Removal of staking hurts the attractiveness of Ethereum ETFs
The removal of staking plans Ethereum ETFs could reduce their attractiveness for investors. Staking is a crucial mechanism for Ethereum and other proof-of-stake blockchains, allowing holders to lock up cryptocurrency deposits to validate transactions and secure the network. In return, punters receive rewards, adding an extra layer of profit potential. Without this option, investors may find direct investments in Ethereum more lucrative.
Brian Rudick, senior strategist at GSR, highlighted the immediate opportunity cost of detention Ether via a US ETF due to lack of staking rewards. Since ETFs cannot offer these staking rewards, investors might prefer to purchase Ether directly on the crypto market. This preference could have a significant impact on the ETF market and its potential growth.
The SEC’s stance on staking plays a crucial role in this development. Staking has been controversial because it allows holders to earn a yield, raising the question of whether the token should be classified as a security. This classification could subject it to strict American regulations. Previously, Kraken paid $30 million to settle SEC allegations related to its staking services, highlighting regulatory scrutiny of staking.
Ayesha Kiani, COO of MNNC Group, highlighted that Ether staking is currently considered more of a security as it offers a yield. This view aligns with SEC standards and impacts the decisions of major ETF issuers like Fidelity and VanEck. Through staking, these entities can help secure the Ethereum blockchain, a missed opportunity for large players to support the network.
Ethereum Stability Boosted by Staking Plan Removal
Many industry advocates see the removal of staking plans as a net positive for decentralization. Leo Mizuhara, founder of Hashnote, has expressed concerns about the centralization of forces within protocols like Ethereum. He noted that staking Ether in ETFs could have led to centralization, similar to the amount of Bitcoin (BTC) now owned by Coinbase due to ETF phenomena.
Mizuhara added that centralizing forces could destabilize the protocol if problems arise. Therefore, lack of participation in ETFs could be beneficial for the stability of Ethereum. This perspective aligns with the goals of maintaining a decentralized financial system, free from dependence on a few intermediaries.
GSR’s Rudick echoed this sentiment, suggesting that not having a stake in ETFs could protect Ethereum from an institutional takeover in the long term. The fear is that if Ether ETFs become as successful as Bitcoin ETFs, issuers could accumulate large amounts of Ether. Currently, around 27% of all Ether in circulation is staked, indicating a delicate balance within the network.
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