The U.S. Securities and Exchange Commission (SEC) has acknowledged the 19b-4 filing by the Cboe exchange while seeking the approval of staking features in the 21Shares Core Ethereum ETF (CETH). This could be a welcome development as crypto ETFs were barred from staking under the SEC chairmanship of Gary Gensler, noting that it violated securities laws.
Will the US SEC Approve Ethereum ETF Staking?
Although, the US CFTC has acknowledged Ethereum as a “commodity”, the US SEC has yet to clearly state its position on ETH, whether it’s a security or a commodity. During the approval of the spot Ethereum ETF last year, the SEC had its own contentions over approving the staking feature.
One of the major concerns the securities agency had was that the service provider i.e. crypto exchange would operate and promote staking as “an investment product” while guaranteeing a certain rate of return. The agency believed that this operating method was unclear and that the investor protection measures were insufficient.
The question here is what has changed now with the SEC, which is that 21Shares is applying for a staking facility on its Ether ETF. Will the Cboe application manager circumvent SEC regulations?
Here’s How CETH Plans to Offer Staking Facility
The 21Shares Core Ethereum ETF (CETH) is staked by entrusting it to a custodian i.e. staking provider and no ETH will be moved from the wallet during the staking period. Moreover, CETH affiliates and sponsors won’t be able to become staking affiliates.
CryptoQuant analyst Mignolet has emphasized the importance of enhancing transparency in exchange staking services to address concerns surrounding fund safety and operational clarity. “If we choose an unrelated provider to increase transparency and avoid moving funds from the custodian’s wallet, we can eliminate unnecessary risks like hacking or the illegal use of customer funds,” he stated.
Staking Ethereum Directly
Furthermore, the 21Shares Core Ethereum ETF (CETH) will directly stake Ethereum held by the company itself and does not involve Ethereum collected from external investors for staking. This distinction is a crucial factor in assessing the risks associated with exchange staking, according to Mignolet.
“Exchange staking is fundamentally a service, but it poses significant risks for individuals staking on these platforms,” Mignolet stated. The analyst further underscored the SEC’s stance on the matter, noting, “As the SEC pointed out, platforms should not promote or guarantee specific returns from staking.”
As the CETH filing addresses all these issues, there won’t be major hurdles in the SEC approval, stated the analyst. Earlier in February, Cboe also submitted an application for the trading of options on spot Ether ETFs.
Ethereum ETF Inflows Continue
Despite the strong crypto market turbulence in February, the Ether ETF inflows have remained healthy with BlackRock’s ETHA leading. On Wednesday, the net inflows stood at $19 million, with Fidelity’s FETH leading with $24.5 million in inflows.
As of press time, Ethereum price is trading 2% up at $2,745 amid a broader crypto market recovery. On the other hand, the Ethereum network transaction fee has dropped to just $0.41 hitting a four-year low.
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