Ethereum (ETH) spot ETFs have once again sparked market optimism. However, they face a significant obstacle: the removal of the staking service, responsible for validating blocks from the network.
ETF issuers like Fidelity and Ark Investment have recently abandoned plans to include staking in their funds. The strategy aims to prevent the United States Securities and Exchange Commission (SEC) from rejecting funds alleging an alleged violation of securities law.
However, this decision may lessen the appeal of ETFs compared to direct investment in ETH. After all, ETFs will not be able to distribute dividends from staking, for example, while direct ownership of ETH allows you to receive rewards.
Harm or benefit?
Removing staking plans from ETFs could reduce their attractiveness to investors. Staking is a crucial mechanism for Ethereum and other Proof of Stake (PoS) blockchains, as it is the way in which the network’s blocks are validated.
In exchange for this validation, ETH holders receive rewards for validating transactions and securing the network. Rewards are part of ETH’s profitability and their absence could harm ETF adoption.
Without this option, investors may find direct investments in Ethereum more profitable and prefer to buy from exchanges rather than purchasing ETFs.
Brian Rudick, senior strategist at GSR, highlighted the immediate opportunity cost of holding Ether through a US ETF due to the loss of staking rewards. Since ETFs cannot offer these rewards, investors may prefer to purchase Ether directly.
The managers did not remove the stake by choice, but rather because they feared the SEC’s position on the service. Because it allows ETH holders to earn yield, the SEC considers staking to be a security. Therefore, only regulated institutions could, in theory, offer this option.
Kraken recently paid $30 million to resolve SEC allegations related to its staking services, highlighting the regulatory scrutiny surrounding the service.
Ayesha Kiani, COO of the MNNC Group, highlighted that because it offers returns, Ethereum staking is seen more as a security. This vision motivated the managers to give up the service.
Removal of Ethereum ETF staking divides opinions
Naturally, the decision to de-stake ETFs divided market opinions. Industry advocates see the removal as a positive outcome, as adoption by ETFs could lessen the decentralization of the service. Leo Mizuhara, founder of Hashnote, expressed concerns about centralization in protocols like Ethereum.
He noted that staked ETH held by ETFs could have led to centralization, similar to the amount of Bitcoin (BTC) held by Coinbase in the names of the cryptocurrency’s 11 ETFs.
Mizuhara added that centralizing forces could destabilize the protocol if problems arise. Consequently, the absence of participation in ETFs could be beneficial for the stability of Ethereum.
This Thursday (23), the SEC will make its first decision on an Ethereum ETF, being able to approve the product or reject it.
Source: https://www.criptofacil.com/bloomberg-retirada-do-staking-pode-esfriar-interesse-por-etfs-de-ethereum/
