According to a February 12 filing with the US Securities and Exchange Commission (SEC), the Cboe BZX Exchange has submitted a request looking for approval for staking throughout the 21Shares Ethereum (ETH) trade-traded fund (ETF).
Cboe Seeks Ethereum ETF Staking Approval
The Cboe BZX Exchange 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 to stake its ETH holdings, enabling buyers to earn staking rewards on their Ethereum holdings.
For the uninitiated, staking is without doubt 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. Under the PoS mannequin, community contributors can stake their ETH to validate transactions and earn rewards in return.
While 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 equivalent to Coinbase and Kraken to discontinue their staking providers for US clients.
However, 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 professional-crypto officers.
This is in stark distinction to the earlier administration beneath former SEC Chair Gary Gensler. The new management change doubtless inspired the Cboe BZX Exchange to submit its request for Ethereum ETF staking providers.
In its software, the Cboe BZX Exchange 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. Rather, it allows the ETF to stake its ETH holdings instantly from its custody pockets.
While the purpose-and-click on staking mechanism reduces the chance of any safety compromise or breach, it doesn’t fully 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 Exchange argued that prohibiting staking for the 21Shares Ethereum ETF is akin to stopping an fairness ETF from distributing dividends to its buyers. The agency contends that staking rewards needs to be handled equally to dividends, as they characterize a further yield generated from holding the asset.
ETH Price Reacts To Staking News
Following the Cboe BZX Exchange’s submitting with the SEC, ETH skilled a pointy value increase. The second-largest cryptocurrency by market capitalization surged from $2,547 to a excessive of $2,795 earlier than stabilizing.
Similarly, ETH staking-associated tokens, equivalent to Lido (LDO), skilled a notable value rally. LDO surged from $1.46 to a peak of $1.84 earlier than retracing to its present value of $1.66 on the time of writing. At press time, ETH trades at $2,633, up 2.3% prior to now 24 hours.
Featured Image from Unsplash.com, Charts from Cboe and TradingView.com
