The U.S. Securities and Exchange Commission (SEC) is considering the 19b-4 filing by Cboe Global Markets, which proposes the inclusion of staking features in the 21Shares Core Ethereum ETF (CETH). This filing marks a potential shift in the SEC’s stance on crypto staking, a topic previously met with resistance under SEC Chairman Gary Gensler, who had barred crypto ETFs from offering staking features on the grounds of securities law violations.
CETH’s proposal seeks to offer a staking method that ensures Ethereum is held by a verified custodian throughout the process. Notably, the ETF would not allow its sponsors or affiliates to act as staking providers, ensuring that all operations are kept separate from external investor funds. This direct staking model is aimed at addressing SEC concerns, particularly regarding investor protections and the risks associated with third-party involvement.
The SEC’s hesitation over staking in crypto ETFs has stemmed from concerns about service providers promoting staking as an “investment product” with guaranteed returns, which the agency argues could lead to insufficient investor safeguards. However, the 21Shares proposal attempts to mitigate these concerns by maintaining the funds within a custodian’s wallet and excluding external Ethereum for staking, which could smooth the approval process.
CryptoQuant analyst Mignolet emphasized the importance of transparency in staking services, noting that the proposed structure could eliminate risks such as hacking or misuse of customer funds. CETH’s direct staking model aligns with these transparency efforts by ensuring Ethereum remains under the control of the custodian throughout the staking process.
Meanwhile, Ethereum’s market continues to show strength, with substantial inflows into Ethereum ETFs despite recent market volatility. Notably, BlackRock’s ETHA and Fidelity’s FETH are leading the charge with millions in inflows, reflecting sustained investor interest in Ethereum-based products. Ethereum’s price has also seen a slight uptick, trading at $2,745, as the broader crypto market recovers.
Cboe’s filing for an Ethereum ETF with staking features could be a significant step forward in the integration of crypto assets into traditional financial markets, potentially paving the way for similar products in the future.
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