Institutional investors are unfazed by the exclusion of staking in upcoming U.S. spot ether (ETH) exchange-traded funds (ETFs), while retail investors are eager for this additional feature, shared Ophelia Snyder, co-founder of digital asset manager 21Shares.
The divergent demands from different investor groups suggest a potential opportunity for providers to introduce separate products tailored to each segment, Snyder explained.
The imminent introduction of spot ether ETFs in the U.S. has garnered attention following the recent regulatory approvals by the Securities and Exchange Commission (SEC). Despite initial plans that involved staking the underlying assets for extra returns, providers have opted to eliminate this feature from their applications to avoid regulatory hurdles, as per Snyder.
The potential impact of staking on liquidity is a key consideration, with Snyder highlighting the fluctuating unstaking periods that could pose challenges for asset managers. While some market observers believe that the absence of staking might deter institutional interest in ether ETFs, Snyder remains confident that institutional investors prioritize effective asset management and risk mitigation over staking features.
21Shares, a prominent player in the digital asset space, is poised to tap into the institutional market with its track record in providing exchange-traded products and ETPs in both Europe and the U.S. While staking remains a component in some of its offerings, the company’s U.S. spot ether ETF application excludes staking as a revenue source.
Snyder also noted the uncertainty surrounding taxation on staking rewards, emphasizing the importance of creating a user-friendly environment to attract institutional participation. Despite retail investor preferences for staked products, the focus on non-staked alternatives could be more appealing to institutional players in the evolving cryptocurrency investment landscape.
Additional Facts:
– Staking is a process in which investors lock up their cryptocurrency holdings to support a blockchain network’s operations and security. In return, they earn rewards for participating in the network consensus mechanism.
– The Ethereum network is gradually transitioning towards a proof-of-stake (PoS) consensus mechanism, where staking will play a crucial role in validating transactions and securing the network.
– Staking rewards are taxable in some jurisdictions, and the tax treatment of these rewards can vary depending on the regulations in different countries.
Key Questions:
1. What are the potential advantages and disadvantages of including staking features in spot ether ETFs?
2. How will the exclusion of staking impact the attractiveness of these ETFs to different investor groups?
3. What regulatory challenges do providers face when considering staking features in ETFs?
4. How can providers address the taxation implications of staking rewards for investors in ETF products?
Advantages:
– Staking features can provide additional returns to investors participating in the network.
– Including staking may attract retail investors interested in earning passive income through their cryptocurrency holdings.
– Staking could enhance network security and decentralization by incentivizing participation in the consensus mechanism.
Disadvantages:
– Regulatory uncertainties and complexities surrounding staking could hinder the launch of ETFs with these features.
– The fluctuating nature of staking rewards and periods may pose challenges for asset managers in managing liquidity and investor expectations.
– Excluding staking could potentially limit the appeal of ETF products to retail investors looking for staking opportunities.
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The source of the article is from the blog foodnext.nl