Grayscale, the world’s largest digital asset manager, is currently grappling with the limitations of Ethereum Trust (ETHE) in the era of Ethereum staking.
Grayscale recently updated its ETHE disclosures, adding:
“Trust cannot participate in Ethereum staking and receive corresponding rewards. This restriction may harm the interests of ETHE shareholders compared to investors who can invest directly in Ethereum or other vehicles that allow staking.”
Grayscale’s frustration is understandable, especially given their ongoing efforts to convert ETHE into an ETF.
In file filing with the SEC in March, the company argued the benefits of being able to “stake ETH held by the trust” in an effort to promote a spot Ethereum ETF. However, the SEC has repeatedly rejected Grayscale’s ETF application, leading to a legal battle between the company and the regulator.
It’s not just Grayscale that has to deal with these legal challenges. Other prominent ETF candidates such as Fidelity and Ark Invest/21 Shares recently removed staking language from their filings in a temporary concession to SEC concerns.
Under Chairman Gary Gensler, the SEC has taken a cautious approach to Ethereum staking, arguing that staking offerings may constitute an offering of securities. The regulator has emphasized the need for clear disclosure on how companies handle cryptocurrency staking, including whether funds are commingled.
While the SEC seems open to approving spot Ethereum ETFs, the issue of staking remains a point of contention. Some experts have warned of “serious security risks” associated with Ethereum ETFs, noting that large, centralized holdings could make the network more vulnerable to attack or manipulation.
For Grayscale, the staking limit is one of many challenges facing its Ethereum Trust.
ETHE has consistently traded at a discount to underlying ETH value, a gap that has widened to nearly 50% in recent months. Converting to an ETF structure can help close this discount by allowing for the creation and redemption of shares.
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According to Decrypt
