Grayscale urges the US Securities and Exchange Commission to approve participation in Ethereum ETF, citing a loss of $61 million in rewards.
Grayscale is urging the US Securities and Exchange Commission to approve participation in Ethereum ETFs, which would lead to the unlocking of millions in rewards, enhance the Ethereum network, and advance cryptocurrency investment in the United States.
Grayscale urged the US Securities and Exchange Commission to allow participation in Ethereum ETFs, highlighting the benefits for key investors.
Representatives from Grayscale Investments met with members of the SEC's cryptocurrency team on April 21 in Washington, D.C., to advocate for changes in the participation regulations related to Ethereum exchange-traded products (ETPs).
In a memo summarizing the meeting, Grayscale detailed its request to amend its typical 19b-4 filings for the Grayscale Ethereum Trust ETF (ETHE) and Grayscale Ethereum Mini Trust ETH, aiming to allow staking activities. Craig Salm, Chief Legal Officer at Grayscale Investments, stated: 'We appreciate the opportunity to collaborate with the SEC's cryptocurrency team.'
The documents submitted during the meeting clarified Grayscale's position to allow US Ethereum traded funds, which collectively manage assets worth $8.1 billion, to deposit their shares, similar to their non-US counterparts. Grayscale emphasized the following:
Ethereum traded platforms (ETPs) lost approximately $61 million due to their inability to participate in staking from their launch until February 2025, not accounting for daily rewards aggregation. Instead, these rewards went to non-US Ethereum traded platforms (ETPs) and other non-traded exchanges.
The crypto asset manager highlighted the benefits of staking, explaining that participation would enhance the security of the Ethereum network while generating additional returns for shareholders. The memo stated: 'Through staking, US exchange-traded Ethereum products will participate in validating transactions on the Ethereum network, contributing to the security and efficiency of the Ethereum blockchain, and in return, earning Ethereum rewards.'
Furthermore, Grayscale presented a multi-layer liquidity strategy, including 'Liquidity Sleeve' and short-term financing options with custodians and liquidity providers, along with a revolving credit facility to mitigate redemption risks during non-participation periods.
In concluding its report, Grayscale emphasized the need to update regulations to reflect the maturity of the exchange-traded Ethereum product market. The document describes the following:
Currently, exchange-traded ETH products do not fully represent the underlying ETH, as they are not currently allowed to participate in staking.
It also noted that non-US markets, especially in Europe and Canada, have already successfully integrated the 'staking' feature into traded products (ETPs) without compromising trading efficiency. Grayscale affirmed: 'By leveraging traditional finance counterparts and experience in managing traded products facing similar liquidity challenges, along with Grayscale's continued engagement and partnerships across the digital asset ecosystem, we can effectively and responsibly invest Ethereum (ETH) in our traded products.' More broadly, the memo acknowledged potential tax implications and risk mitigation but expressed confidence that operational safeguards and custody arrangements, particularly with Coinbase Custody, would manage these risks.
