SEC Approves Ethereum ETF Staking: A New Era for Crypto Investments

The U.S. Securities and Exchange Commission (SEC) has acknowledged the 19b-4 filing by the Cboe exchange, seeking approval for staking features in the 21Shares Core Ethereum ETF (CETH). This development could pave the way for crypto ETFs to offer staking services, a practice previously barred under the SEC chairmanship of Gary Gensler.

Previously, the SEC had concerns about approving staking features in Ethereum ETFs, particularly regarding the operation and promotion of staking as an investment product with guaranteed returns. The agency also expressed concerns about insufficient investor protection measures. However, the recent filing by 21Shares addresses these issues, potentially smoothing the path for SEC approval.

The 21Shares Core Ethereum ETF (CETH) plans to offer staking services by entrusting Ethereum to a custodian, with no ETH movement from the wallet during the staking period. Additionally, CETH affiliates and sponsors will not become staking affiliates. CryptoQuant analyst Mignolet emphasizes the importance of enhancing transparency in exchange staking services to address concerns surrounding fund safety and operational clarity.

CETH will directly stake Ethereum held by the company itself, not involving Ethereum collected from external investors for staking. This distinction is crucial in assessing the risks associated with exchange staking. Mignolet notes that exchange staking is fundamentally a service but poses significant risks for individuals staking on these platforms. The SEC's stance on the matter is that platforms should not promote or guarantee specific returns from staking.

Given that the CETH filing addresses the SEC's concerns, there may not be major hurdles in obtaining approval. Earlier in February, Cboe also submitted an application for the trading of options on spot Ether ETFs. Despite the strong crypto market turbulence in February, Ethereum ETF inflows have remained healthy, with BlackRock's ETHA leading. As of press time, Ethereum price is trading 2% up at $2,745 amid a broader crypto market recovery.