BlackRock Launches Ethereum Fund Focused on Staking-Based Yield

Summary

• BlackRock has filed an amended S-1 registration statement with U.S. regulators, advancing the launch of a yield-generating Ethereum fund.
• BlackRock’s Ethereum ETF will give investors 82% of staking rewards.
• The company is partnering with Coinbase to handle staking and simplify crypto investing.

BlackRock, the largest asset manager and provider of investment services, has taken a strategic move by updating its SEC filing (S-1) for the proposed iShares Staked Ethereum Trust ETF. According to the registration statement, 18% of the gross staking rewards will be split between the sponsor and the prime execution agent.

BlackRock Staked Ethereum ETF Filing Indicating 18% Staking Cut

The amended registration filing covers the iShares Staked Ethereum Trust ETF, to trade on Nasdaq Stock Market LLC under the ETHB ticker. BlackRock announced that it will stake between 70% and 90% of the Ethereum holdings.

However, the company will retain some ETH holdings in liquid form for fees, risk management, and redemptions. Staking is a core strategy of ETHA, and according to the filing, a 12-month waiver is mentioned to reduce the sponsor fee. After the waiver, 0.12% for the first $2.5 billion of trust assets.

The sponsor fee is not like the staking fee. The sponsor fee is mentioned as an annualized percentage of the trust’s net asset value (NAV). On the other hand, the staking fee is mentioned as a percentage of staking consideration.

The filing noted that staking rewards earned in ETH will increase the fund’s NAV. Moreover, shareholders will receive distributions at least quarterly after the fees are deducted. Staking-related service providers can charge additional costs.

BlackRock and Coinbase’s New Approach to Claim the Shares

According to the staking-related conditions, BlackRock and Coinbase will claim 18% of the staking yields from BlackRock’s iShares Ethereum Staking ETF.

The move signifies that BlackRock is positioning itself as the leading power in the cryptocurrency exchange-traded products market. This is supported by the report from DefiLlama, which highlights that ETHA manages over $9.1 billion in assets. It precedes Grayscale’s ETHE, which holds $2.3 billion in Ether.

Analysts expect that ETHB will dominate the Ethereum ETF market, as it is expected to yield 2.8 % annually. As per their research, analysts found that the SEC approved Ethereum ETFs last year, but they did not include staking rewards. This was after the federal regulators stated that certain staking activities are not securities. The filing also states that staking rewards are taxable income under the current IRS rules.

This created an opportunity for companies to profit from staking-enabled ETFs. BlackRock’s and Coinbase’s new staking infrastructure is built on existing blockchain technology. It can support rapid crypto adoption across various institutions by integrating with traditional finance.

Conclusion

BlackRock’s new strategies indicate a major shift from price-only tracking to a yield-bearing investment model for Ethereum ETFs. The traditional Ethereum ETFs, such as ETHA, only fluctuate based on the market price of Ether. However, the new fund, ETHB, which allows staking, enables investors to earn passive income. Though some analysts believe that staking through ETFs can enhance network security, others argue that it would increase centralization, as only a few entities have too much control over the staked supply.