Ethereum
Grayscale Ethereum Trust Faces “Comparative Disadvantage” Without Staking: SEC Filing
Grayscale, the world’s largest digital asset manager, is currently grappling with the limitations of its Ethereum Trust (ETHE) in the Ethereum era. staking.
Grayscale recently updated its information on ETHE, adding: “The Trust’s current inability to use its Ether in Staking and receive such rewards could place the Shares at a disadvantage compared to investing in Ether directly. or through a vehicle which is not subject to such prohibition, which could adversely affect the value of the Shares.
This addition follows the success of Ethereum Shanghai Upgrade in April, which allowed investors to withdraw their locked ETH and rewards, making staking a more attractive proposition for many investors. With annual staking returns between 4-6%, ETHE investors are missing out on potential returns.
If the Grayscale Ethereum Fund were to ever allow staking, the company noted, it would first need to amend its trust agreement with the SEC. And NYSE Arca – the exchange where ETHE shares trade – is expected to file for a rule change with the SEC. The company wrote that it “may seek” approval to do so in the future, but made it very clear that it cannot bet on any of the Ethereum backing the fund’s shares at this time.
Grayscale’s frustration is understandable, especially given its ongoing efforts to convert ETHE into an ETF.
In a March SEC Filingthe company highlighted the advantages to be able to “put into play the Ethereum held by the Trust” as part of its promotion of a spot ETH ETF. However, the SEC repeatedly denied Grayscale’s ETF applications, leading to a legal battle between the company and the regulator.
Grayscale is not alone in facing these regulatory challenges. Other major ETF candidates, such as Fidelity and Ark Invest/21 Shares, have recently staking language removed of their filings in what appears to be a temporary concession to the SEC’s concerns.
Under the leadership of Gary Gensler, the SEC has taken a cautious approach to Ethereum staking, arguing that staking services may constitute securities offerings. The regulator stressed the need to clearly disclose how staked cryptocurrencies are managed by companies, particularly if funds are mixed.
Although the SEC appears willing to approve Ethereum spot ETFs, the issue of staking remains a point of contention. Some experts have warned against “serious safety risks” associated with Ethereum ETFs, noting that large, centralized holdings could make the network more vulnerable to attacks or manipulation.
For Grayscale, limiting staking is one of the many challenges facing its Ethereum Trust.
ETHE has always negotiated at a discount compared to its underlying ETH value, a gap that has widened to almost 50% in recent months. Converting to an ETF structure could potentially help reduce this discount by allowing the creation and redemption of shares.
Edited by Stacy Elliott.