The implementation of staking could be a game-changer for Ethereum exchange-traded funds (ETFs), according to Robert Mitchnick, head of digital assets at BlackRock.
Speaking at the Digital Asset Summit in New York, Mitchnick acknowledged that interest in Ethereum ETFs has been muted since their launch last summer. He attributed the funds’ underperformance to their inability to generate returns through staking.
“A staking yield is a significant part of how you can generate investment returns in this space,” Mitchnick explained. Staking allows investors to earn passive income on their crypto holdings by locking tokens into the network for a set period of time.
This option allows investors to monetize their crypto assets if they do not plan to sell them soon. Staking is currently not available for spot ETH or Bitcoin ETFs.
To date, the US Securities and Exchange Commission (SEC) has considered staking services to be potential unregistered securities, relying on the Howey Test, which is used to determine whether an asset constitutes an investment contract and therefore a security.
However, Mitchnick was optimistic about the implementation of staking under a crypto-friendly SEC.
Ethereum, which is the second-largest cryptocurrency by market capitalization, has been facing major challenges recently. The digital currency has seen a decline of around 40% this year.
Indeed, Ethereum is on track to post its worst first-quarter performance since its inception in 2015. BlackRock, which issues the iShares Ethereum Trust ETF (ETHA), has seen the fund’s value fall 43% year-to-date.