Grayscale Proposes Ethereum Staking in ETFs to Boost Liquidity

Grayscale Investments has submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to introduce Ethereum staking in their exchange-traded funds (ETFs). This strategic move aims to enhance asset growth and provide investors with access to staking yields, a feature currently unavailable in the U.S. due to regulatory limitations. The proposal, filed by NYSE Arca, is under review until June 2025.

If approved, the proposal could significantly boost Ethereum's liquidity and attract more institutional investors. This would set a precedent for future fund structures in the crypto industry, potentially impacting related tokens and elevating Ethereum's market position. Grayscale estimates that U.S. Ethereum ETPs have foregone approximately $61 million in potential staking rewards since their launch through February 2025. If the prohibition continues, Grayscale projects ETPs could miss out on $5.5 billion in staking benefits over the next decade when factoring in daily compounding.

The outcome of this proposal could reshape broader market dynamics. Past regulatory actions have shown that approvals can lead to significant spikes in institutional adoption. While no major public statements from key figures like Michael Sonnenshein, CEO of Grayscale Investments, are noted, Grayscale's filings articulate strong support for the proposal. The current $8.1 billion in U.S.-based Ethereum ETP assets reflects the stakes involved, with potential financial impacts including increased investor inflows and enhanced liquidity.

Approval of the proposal would also align the U.S. market more closely with international markets, potentially benefiting other proof-of-stake assets. This regulatory review's outcome in June 2025 holds considerable implications for U.S. market competitiveness. The proposal is part of a larger effort to convert Grayscale's Digital Large Cap Fund into a spot ETF, which was initially approved by the SEC on July 1, 2025. This ETF is designed to track the performance of a basket of top cryptocurrencies, including Bitcoin, Ethereum, XRP, and Cardano, and will be listed on the New York Stock Exchange Arca.

The inclusion of Ethereum staking in US ETFs is expected to attract more institutional investors, who are increasingly looking for ways to participate in the cryptocurrency market without directly holding the assets. Ethereum staking allows investors to earn rewards by participating in the network's consensus mechanism, which could provide an additional layer of return on investment. This development is seen as a significant step towards the broader legitimization of digital assets within traditional finance.

Grayscale's proposal comes at a time when Ethereum has seen substantial institutional interest. On July 3, 2025, U.S. Spot Ethereum ETFs recorded a combined net inflow of $148.21 million, with BlackRock's ETHA leading the charge with $85.01 million in net inflows. Fidelity's FETH also saw significant inflows, securing $64.65 million. These inflows underscore the growing institutional appetite for Ethereum and signal a pivotal moment for the cryptocurrency market. The availability and success of these ETFs provide a stamp of approval from traditional finance, potentially attracting more mainstream investors.

While the overall picture for Spot Ethereum ETFs was overwhelmingly positive, Grayscale’s ETHE (Ethereum Trust) logged a net outflow of $5.35 million on the same day. This outflow from Grayscale ETHE is not entirely unexpected and mirrors a trend seen with Grayscale’s Bitcoin Trust (GBTC) when Bitcoin spot ETFs launched. As Grayscale’s trust products convert into ETFs, some investors may choose to redeem their holdings or shift capital to other, potentially more liquid or lower-fee ETF offerings from competitors like BlackRock or Fidelity. The Grayscale mini ETH, a separate product, did see a positive inflow of $3.9 million, indicating that while their flagship trust experienced redemptions, there’s still interest in their newer offerings. This dynamic is a natural part of market maturation as capital seeks the most efficient and attractive investment vehicles.