By Nancy, PANews

Crypto spot ETFs are finally entering the era of staking. Grayscale recently announced significant progress, launching the first spot crypto ETF in the US to support staking. By leveraging policy and compliance initiatives, Grayscale pioneered on-chain staking, opening up participation channels. However, inflows have been relatively flat. Meanwhile, with the implementation of new ETP universal listing standards, competition in the spot crypto ETF market is accelerating.

Grayscale was the first to open staking, but the market response was lower than expected

On October 6, Grayscale announced that its Ethereum Trust ETF (ETHE) and Grayscale Ethereum Mini Trust ETF (ETH) officially became the first spot crypto asset ETFs in the United States to support staking functions.

Grayscale Solana Trust (GSOL) has also launched a staking feature, providing investors with an exclusive channel to participate in SOL staking through traditional brokerage accounts. As regulatory approvals progress, GSOL is expected to become the first spot Solana ETP to support staking. Grayscale has stated that it plans to expand staking to more products in the future.

According to official disclosures, it will passively stake with a diverse network of validators through institutional-grade custodians (such as Coinbase and Figment) to ensure the security of the underlying blockchain protocol while supporting the long-term resilience of the network. Regarding the distribution of staking returns, ETHE shareholders can receive up to 77% of the total staking returns, with the remaining 23% going to the issuer, custodian, and staking service provider. Investors in ETH products receive an even higher return of 94%, with the three parties receiving only a 6% share.

Since the launch of the staking feature, on-chain data shows that Grayscale has staked over 1.16 million ETH. Of this, 49.46% of ETH held by ETHE has been staked, and the total ETH staked is 47.79%. According to ValidatorQuene data, the current queue for staking is approximately 1.36 million ETH, with Grayscale holding 85.4% of the total.

Grayscale's introduction of a staking feature is seen as filling a gap in staking returns for Ethereum spot ETFs, providing institutional investors with a new passive income channel and potentially attracting further capital inflows. However, judging by capital flows, the market reaction has been relatively muted. SoSoValue data shows that since October 6th, ETHE has seen a net outflow of $1.95 million and a net inflow of approximately $24.17 million. In contrast, BlackRock's ETHA has attracted over $670 million during the same period.

Taking advantage of policy and compliance shortcuts to get ahead of the curve; the government shutdown may delay the approval process for other ETFs

Before Grayscale officially launched staking functionality for its Ethereum ETF, several issuers, including BlackRock and Franklin Templeton, had submitted proposals to add staking functionality, but were repeatedly delayed by the SEC. Grayscale's early lead stemmed from its clever exploitation of structural differences in the US regulatory framework and recent policy relaxations, allowing it to bypass the traditional, lengthy approval process.

Grayscale's ETHE and ETH are ETFs registered under the Securities Act of 1933, rather than funds managed under the Investment Company Act of 1940. Unlike the latter, which requires rigorous operational approvals, the former only requires SEC review of disclosure documents. This means that ETFs can flexibly adjust features, such as adding collateral, without directly holding a majority of the physical assets (e.g., through a trust structure) without requiring additional SEC approval. In contrast, issuers like BlackRock and Fidelity, under the Investment Company Act of 1940, require full approval to add collateral mechanisms, resulting in multiple SEC delays.

Last month, Grayscale proposed three amendments to the trust agreement to shareholders, enabling its Ethereum spot ETF product to stake and earn corresponding staking returns. These amendments included authorizing the trust to stake Ethereum, allowing sponsors to charge additional staking fees, and granting sponsors the authority to amend the trust agreement under certain conditions. All three proposals passed with overwhelming approval, with the staking authorization proposal receiving 99.75% shareholder support.

Crucially, the SEC approved universal listing standards for crypto ETPs in September of this year, allowing exchanges (such as NYSE Arca) to independently approve listings and new functional adjustments for new products as long as they meet basic criteria (liquidity, transparency, and compliance disclosure requirements), eliminating the need to submit case-by-case Rule 19b-4 amendment applications. After the new rules came into effect, Grayscale withdrew its application for staking functionality amendments on September 29th and successfully received SEC approval, enabling the Ethereum ETF to operate under NYSE Arca's universal listing framework, Rule 8.201-E, enabling listing and trading without separate approval.

Leveraging its flexible policy and compliance pathways, Grayscale successfully secured a lead, becoming the first spot crypto ETF on the market to support staking. As the SEC gradually relaxes its regulatory policies for crypto asset ETFs, more issuers are accelerating the launch or follow-up of products supporting staking, triggering a new round of competition. For example, 21Shares recently announced the introduction of staking for its Ethereum ETF, offering a one-year sponsorship fee waiver; and Bitwise set the Solana staking ETF fee at 0.20%, below market expectations.

However, the US government has entered a shutdown state, and the SEC currently only retains a very small number of emergency personnel. This means that the approval work of crypto ETFs will be subject to certain restrictions, which may affect the launch rhythm of other ETF staking functions in the short term.

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