Ethereum News Today: BlackRock Proposes Staking for Ethereum ETF, Aims for 3% Annual Yield

BlackRock, the world's largest asset manager, has submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to incorporate staking functionality into its iShares Ethereum Trust (ETHA) exchange-traded fund (ETF). This move, if approved, would enable the fund to provide investors with exposure to staking rewards generated from using the underlying Ether as collateral security for Ethereum’s proof-of-stake consensus algorithm. The goal of staking is to generate additional returns for the ETF and its investors.

This move is seen as highly bullish by market observers. If approved by the SEC, it would mark the first time a regulated U.S. ETF is allowed to participate in Ethereum staking, blending traditional finance with decentralized protocols in a powerful way. Ethereum staking allows holders to earn passive income by securing the network. For institutional players like BlackRock, this presents a dual benefit: exposure to Ethereum’s price and the ability to generate yield.

Including staking in the ETF could significantly boost demand for Ethereum while simultaneously locking up more supply. This dynamic is often referred to as “turbo mode” by crypto enthusiasts because it adds fuel to price movements by reducing sell pressure and increasing buying interest. Should the SEC approve this application, it could set a new standard for future crypto ETFs. With Ethereum already being deflationary after its shift to proof-of-stake, adding institutional staking demand could further constrain supply.

That scarcity, combined with rising interest from traditional investors, could dramatically alter Ethereum’s price trajectory. The market is now watching closely—if this gets the green light, it could be a game-changer for ETH. 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. The rule change would add a detailed “staking” section permitting BlackRock to stake Ethereum (ETH) directly or through one or more trusted staking providers. This move aims to enable the iShares Ethereum Trust ETF, managed by BlackRock, to engage in crypto staking activities, potentially unlocking an annual yield of approximately 3%, making ETHA much more appealing to investors.