In a significant development for the cryptocurrency landscape, BlackRock and Coinbase are set to take an 18% cut from the staking revenue generated by BlackRock’s upcoming Ethereum exchange-traded fund (ETF), known as ETHB. This information was disclosed in a document submitted to the Securities and Exchange Commission (SEC) on Tuesday.
As the world’s largest asset manager, BlackRock is already a dominant force within the crypto exchange-traded products market. Its existing Ethereum ETF, ETHA, has amassed over $9.1 billion in assets under management, according to data from DefiLlama. In stark contrast, Grayscale’s Ethereum Trust, ETHE, trails significantly with assets worth approximately $2.3 billion.
ETHB is poised to take the lead in the Ethereum ETF market, particularly because it will generate staking yields. As of Tuesday, this yield was estimated at an annualized rate of 2.8%. The SEC approved the concept of Ethereum ETFs in the previous year; however, the initial versions did not provide staking rewards. Clarification from the SEC in May opened the door for staking-enabled ETFs, contributing to the anticipation surrounding ETHB.
The structure of ETHB indicates that 82% of staking rewards will be distributed to investors, with the remaining 18% designated for BlackRock and Coinbase, which acts as the ETF’s prime execution agent. This model is designed to create a financial incentive for the sponsor to increase the amount of Ether staked by the trust. Nonetheless, ETHB will limit its staked Ether to between 70% and 95% of its total assets under management. This limitation is crucial to meet investor redemption requests, as staking too much Ether could complicate the ability to fulfill these requests, potentially resulting in significant disparities between the share price and net asset value (NAV).
The introduction of ETFs has offered U.S. investors a more familiar avenue for engaging with the cryptocurrency market, reminiscent of the dynamics that propelled Bitcoin’s rally in 2024. Despite this positive outlook, concerns have emerged in the cryptocurrency community regarding the increasing dominance of large asset managers. Ethereum co-founder Vitalik Buterin has expressed apprehensions about the concentration of Ethereum ownership within Wall Street, suggesting that it could skew the blockchain’s governance and lead to centralized control mechanisms.
While BlackRock is not the first asset manager to propose a staked Ethereum ETF—Grayscale’s existing ETFs, ETHE and ETH, do yield revenue through staking—other firms like VanEck have also initiated efforts to launch similar products. This growing interest from major asset management firms signals a complex evolution in the cryptocurrency investment space, with traditional finance increasingly intersecting with decentralized finance.
