Ether ETF’s Lack of Staking Won’t Dampen Strong Institutional Demand, 21Shares’ Ophelia Snyder Says

Snyder explained to CoinDesk that the difference between the two groups suggests a viable business opportunity for providers to offer distinct products catering to each market.

Ether Exchange-Traded Funds (ETFs) may become available in the U.S. soon following the SEC’s approval of crucial registration documents from applicants last month. SEC Chairman Gary Gensler indicated during a Senate budget hearing that final approvals could be granted within the next few months. In preparation, potential ETF providers have eliminated staking provisions to circumvent potential regulatory hurdles.

As a crypto investor, I’d like to remind you of an often overlooked aspect: staked assets can significantly affect your asset’s liquidity. For instance, if the unstaking period for ether extends to 22 days, as it sometimes does, here are some ways to manage this situation:

Institutional appetite

It has been proposed that the absence of staking may diminish investor interest in ether Exchange-Traded Funds (ETFs). JPMorgan anticipates $3 billion in investments by the end of 2024. This amount could potentially be doubled if staking were allowed.

Snyder holds a different perspective. She believes that the lack of staking isn’t problematic for institutional investors if it were, they would be keen on observing a proven record of asset managers skillfully handling withdrawal delays due to the inherent risk management involved in this process.

Snyder explained that the length of the unstaking period, which is the time required to withdraw staked funds, can vary from as little as six days to as many as nine days or more. This wide range could significantly impact your cash flow and thus, your investment strategy. It’s not a sudden shift from nine to 22 days; instead, it gradually extends. By closely monitoring these changes and utilizing relevant data inputs, you can optimize your portfolio for the best possible returns while minimizing the risk of encountering liquidity issues.

As an analyst, I can say that 21Shares holds a significant position in the institutional market. In Europe, it ranks among the largest Exchange-Traded Product (ETP) issuers. The company’s ether ETP, which does not include staking, manages approximately $532 million in assets under management (AUM). Similarly, its Solana equivalent boasts an impressive $821 million AUM. Additionally, 21Shares has applied for a U.S. spot ether ETF that excludes staking as a source of income.

As a researcher investigating the potential implications of staking rewards in the context of cryptocurrencies, I’ve come across another important consideration: taxation. The specifics regarding how these rewards will be classified and taxed in the United States remain uncertain at this time.

She proposed that if you aim to attract institutions to engage, it’s crucial to make the process inviting first. Offerings with fewer regulatory requirements could be more appealing to institutional investors, despite having a smaller following among retail investors.