Cboe BZX Seeks SEC Approval for Staking in Ethereum ETF

On February 12, the Cboe BZX Exchange made a formal request to the U.S. Securities and Exchange Commission (SEC), seeking approval to allow staking within the 21Shares Ethereum (ETH) exchange-traded fund (ETF).

This move, if accepted, would enable the ETF to stake its Ethereum holdings and allow investors to earn rewards through Ethereum’s Proof-of-Stake (PoS) mechanism.

Ethereum’s transition to PoS in 2022 marked a significant shift from its original Proof-of-Work (PoW) system. The PoS model allows network participants to stake their ETH to help validate transactions and earn staking rewards. In 2024, the SEC approved the first Ethereum ETF but prohibited staking, citing concerns over potential violations of securities laws. This restriction led major platforms like Coinbase and Kraken to cease staking services for U.S. users.

With a change in leadership at the SEC following the 2024 U.S. presidential election, the agency may be shifting toward a more crypto-friendly stance. This shift likely prompted Cboe BZX to seek approval for the new staking proposal, which uses a “point-and-click” method that eliminates the need to move Ethereum to third-party services for staking. This system would allow the ETF to directly stake its Ethereum from its own custody wallet, reducing security risks.

While this staking approach minimizes potential vulnerabilities, it doesn’t entirely eliminate the possibility of slashing penalties. These penalties occur when validators breach network rules, leading to the loss of a portion or all of their staked ETH. Cboe BZX’s filing argues that preventing staking within the Ethereum ETF would be analogous to stopping an equity ETF from distributing dividends, as staking rewards are seen as a form of yield similar to dividends generated by traditional assets.

Author

Alexander Stefanov

Reporter at CoinsPress

Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.