Recently, the Ethereum network has seen several positive developments, including technological upgrades, regulatory clarifications, and innovative financial products, all of which have improved market confidence in ETH.
This article will analyze the following points:
The significance of the 'Pectra' upgrade on May 7, 2025;
Clarification from U.S. regulatory authorities on the regulatory positioning of pledging activities;
Status of REX Shares' application for Ethereum and Solana Pledging ETF;
as well as rumors and realities regarding the participation of large U.S. banks in pledging. Finally, assess the comprehensive impact of these factors on ETH's market appeal, institutional participation, regulatory transparency, and long-term price momentum.
Pectra Upgrade: Enhanced Efficiency for Large Pledging
On May 7, 2025, Ethereum successfully implemented a major upgrade codenamed 'Pectra', which core change was to increase the maximum ETH that a single validator can pledge from 32 to 2048 through EIP-7251. This means that large pledgers can concentrate more ETH into a single node, potentially reducing the complexity and bandwidth consumption of multi-node operations. The project team stated that this upgrade aims to streamline the pledging process, enhance wallet functionalities, and improve overall network efficiency, thereby improving user experience and enhancing network scalability. For example, large pledgers who previously needed to deploy multiple nodes to invest sufficient funds can now consolidate the pledging amount of up to 64 validators into one node, reducing operational and maintenance costs. For the market, the Pectra upgrade indicates that Ethereum is continuously optimizing its underlying architecture, improving network performance and throughput, which helps enhance ETH's appeal to large holders and institutional investors and lays the foundation for subsequent technological evolution.
Regulatory Clarification: Pledging Non-Securities Reduces Compliance Risks
The U.S. Securities and Exchange Commission (SEC) recently issued an official statement, clearly stating that eligible protocol pledging activities do not constitute the issuance or trading of securities. According to the SEC's corporate finance division, node operators (including self-operated or authorized validators) and related service providers participating in pledging activities in proof-of-stake (PoS) networks do not need to treat pledging transactions as securities transactions or register them. This statement alleviates concerns that pledging income could be classified as securities, providing clearer compliance guidance for institutions and platforms. The clarification of regulatory attitudes has increased transparency throughout the pledging ecosystem, encouraging more market participants to take a more positive stance towards participating in Ethereum pledging, helping to stabilize market expectations and attract long-term capital allocation.
REX Pledging ETF: A New Channel for Institutional Investment
Recently, REX Shares submitted an application for an Ethereum and Solana Pledging ETF to the SEC, which was marked as 'immediately effective' on May 30 after submission. This ETF intends to invest at least 80% of its assets in ETH or SOL, with at least 50% of its holdings used for on-chain pledging to earn network rewards, which will then be distributed to investors as dividends. Notably, REX employs a rare C-corporation structure to operate the fund for tax optimization. Fund documents disclose that under this structure, the fund must pay corporate taxes, but pledging income can be distributed to investors as dividends, providing substantial on-chain returns. Industry analysts believe REX is utilizing the Investment Company Act of 1940 to accelerate product launches and avoid the cumbersome approval processes of the Securities Act of 1933. The launch of this pledging ETF provides a convenient way for both institutional and retail investors to participate in Ethereum pledging. Investors can indirectly participate in large pledges and earn pledging returns simply by purchasing the ETF, which is expected to significantly increase market attention and investment demand for ETH pledging opportunities.
Rumors about bank pledges and market responses
Recently, rumors have emerged on social media claiming that several large U.S. banks have been approved to participate in Ethereum pledging. This news originated from a post by network commentator Crypto Rover on May 31, stating that 'multiple trillion-dollar banks are now officially allowed to pledge ETH,' but did not cite any official announcements. In reality, as of now, no authoritative institution or regulatory body has confirmed this claim. Mainstream media reports, such as those from Reuters, indicate that the U.S. banking industry remains very cautious about engaging with crypto assets, primarily exploring related opportunities through pilot blockchain applications, issuing stablecoins, or providing cryptocurrency custody. For example, reports have indicated that some senior executives from major banks, including Bank of America, have discussed issuing stablecoins to participate in digital payments, but have not made explicit statements regarding direct pledging of cryptocurrencies. Therefore, it is currently prudent to view the rumors of bank participation in pledging with skepticism; such messages reflect market expectations for banks entering the crypto field rather than actual progress. The mainstream view suggests that banks will need a clearer regulatory framework to broadly participate in Ethereum pledging, and that current pledging-related businesses are still in a wait-and-see and planning stage.
Comprehensive Impact Assessment
Market Appeal: The Pectra upgrade significantly increased the scale of single-node pledging, allowing large pledgers and institutions to participate in network maintenance more efficiently; meanwhile, the SEC's clarification on pledging non-securities reduced compliance risks. The dual benefits of technological upgrades and regulatory clarity have enhanced the fundamentals of ETH, boosting market confidence and investment appeal.
Institutional Investment Participation: The pledging ETF proposed by REX operates under a C-corporation structure and distributes pledging income in the form of dividends. This innovative product and clear regulatory backdrop will significantly lower the barriers to institutional participation, attracting more traditional capital into the Ethereum ecosystem. Although major banks have not yet directly participated in ETH pledging, strategically, they are trialing blockchain applications on a small scale to prepare for potential deep involvement in the future.
Regulatory Transparency: The SEC's position statement on protocol pledging provides the market with clear expectations, showing that regulatory agencies are increasingly clear about their attitudes towards digital asset investment products. Meanwhile, REX ETF's application submitted as 'immediately effective' reflects a cautious yet open attitude from regulatory authorities towards new crypto products. This transparency helps create a predictable compliance environment, allowing investors to more confidently position themselves within the Ethereum ecosystem.
Long-Term Price Momentum: Under multiple positive factors, Ethereum's locked supply and demand are expected to increase. The ease of pledging brought by the Pectra upgrade helps further enhance pledging participation rates, while potential inflows of institutional funds and ETFs will also lock in more ETH supply; meanwhile, the on-chain reward distribution mechanism strengthens the incentives for long-term holding. Overall, these factors jointly drive market demand growth, contributing to sustained upward momentum in ETH prices.
References: Ethereum Official Upgrade Announcement; U.S. SEC Employee Statement; REX Shares Pledging ETF Documents; Crypto Rover Social Media Post; Reuters Banking Industry Reports.
