Ethereum News Today: BlackRock Files for Staking in iShares Ethereum ETF

Nasdaq has filed an application with the US Securities and Exchange Commission (SEC) on behalf of BlackRock to add staking to the asset manager’s iShares Ether (ETH) exchange-traded fund (ETF). This move, if approved, would allow the fund to provide investors with exposure to staking rewards accrued from using the underlying Ether as collateral security for Ethereum’s proof-of-stake consensus algorithm.

The SEC's guidance in May classified staking rewards earned from validation services on proof-of-stake blockchain networks as earned income rather than securities transactions subject to capital gains tax. This guidance opened the doors for institutional investors to earn yield on their ETH holdings, a major feature for traditional financial institutions that must produce income or cash flow for shareholders.

Ethereum has seen a surge in institutional interest, with treasury companies scooping up significant amounts of ETH for their corporate reserves. The amount of staked ETH reached a new all-time high, accounting for over 29% of the circulating supply. This rising demand is also reflected in strong ETF flows during June and July, following stunted performance earlier this year due to macroeconomic fears.

The proposal to add staking to the iShares Ethereum Trust ETF has been met with both support and criticism. Proponents argue that staking would increase returns for investors, while critics raise concerns about potential security vulnerabilities and market manipulation. The updated prospectus for the ETF indicates that the products would not include staking. However, the new filing proposes deleting that passage and introducing new language that allows for staking. According to the new language, the Trust would receive all or a portion of the staking rewards generated by the staking provider, which may be treated as income to the Trust.

BlackRock's Ethereum fund has been the most successful in its category, generating significant net inflows. The addition of staking functionality to the iShares Ethereum Trust ETF could further attract investors seeking passive income alongside their Ethereum investments. The SEC is expected to issue decisions on similar requests for staking submitted by other issuers in the coming months.