Ethereum ETF staking yields could drive institutional adoption if regulatory barriers ease under Trump: analysts

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The Block2024/12/17 13:33

By:Brian McGleenon

The Trump administration could pave the way for Ethereum staking in spot ETFs, unlocking new yield opportunities and attracting institutional investors with clearer regulatory frameworks, analysts said.Analysts suggest Ethereum staking yields could drive significant inflows into U.S.-based ETFs, offering attractive returns amid declining interest rates and positioning Ethereum as a more compelling institutional investment.

Ethereum ETF staking yields could drive institutional adoption if regulatory barriers ease under Trump: analysts image 0

A potential shift in regulatory stance under a Trump administration could open the door for Ethereum staking in spot exchange-traded funds (ETFs), creating new yield-generating opportunities for institutional investors, analysts suggest.

"Under the Trump administration, staking is likely to receive the necessary legal framework, paving the way for broader adoption, including participation by institutions," YouHodler Chief of Markets Ruslan Lienkha told The Block. "With such a framework in place, Ethereum is well-positioned to attract increased liquidity as it offers an additional yield-generating opportunity through staking."

However, Lienkha cautioned that institutional adoption may be gradual due to risks associated with ether volatility and operational challenges. “While the yield is attractive, factors like ETH/USD volatility and operational risks could deter risk-averse institutions,” he added.

CryptoQuant head of research Julio Moreno also highlighted that staking yields could become a major driver of inflows into spot Ethereum ETFs . "Institutional demand for Ethereum could increase significantly, as staking-enabled ETFs provide a direct incentive for long-term holding, reducing circulating supply and enhancing Ethereum’s appeal as a yield-generating investment," Moreno told The Block.

In a recent note, Bernstein analysts said that if a second Trump administration ushers in a crypto-friendly SEC that paves the way for spot Ethereum ETF staking, the digital asset's current staking yield could rise. "In a declining rate environment, ether's current 3% yield, which could rise to 4-5% with a boost in blockchain activity, is increasingly attractive, offering compelling returns for investors while benefiting asset managers through improved ETF economics," they added.

Ethereum staking yields may become more appealing amid declining interest rates

Wormhole Foundation co-founder Robinson Burkey highlighted that staking rewards could drive sustained inflows into Ethereum spot ETFs. "I think we will see the regulatory environment under Trump allow Ethereum ETF staking for institutional participants in 2025, but the specific mechanisms of rewards distribution may face greater scrutiny," Burkey said.

He noted that although staking yields could become the primary driver of sustained inflows into spot Ethereum ETFs , institutional interest may hinge on consistent reward structures which would need to fall under clearly delineated rules and regulations consistent with the risk and compliance programs of institutions. "By extension, regulatory clarity would increase overall demand for Ethereum as an institutional investment in 2025, especially if staking rewards are seen as reliable and compliant with regulatory standards and interest rates continue to trend downwards," Burkey added.

There currently exists clear market demand for Ethereum as a standalone asset. According to CoinShares data , Ethereum-based funds witnessed their seventh consecutive week of net inflows, adding another $1 billion to a total of $3.7 billion for the period. The U.S. spot Ethereum ETFs contributed $854.8 million to this amount last week, extending their own positive streak to 15 trading days totaling $2.25 billion, according to data compiled by The Block.

In the U.S., while several spot Ethereum ETFs exist, none currently include staking due to the SEC rejecting all ETF proposals (S-1 filings) that initially incorporated it. This contrasts with jurisdictions like Switzerland and Canada, where staking for underlying ETH has been approved. In these markets, investors benefit from enhanced returns through staking rewards, while issuers can earn a spread on the total staking yield.

Offchain Labs CEO Steven Goldfeder emphasized that Ethereum's staking mechanism—its native process for securing the blockchain while rewarding participants with yield—adds a critical layer of value to the digital asset. He argued that any Ethereum investment product excluding staking is likely falling short of its full potential. “Ethereum spot ETFs without staking yield are at a considerable disadvantage and risk becoming obsolete,” Goldfeder told The Block. “Both institutional and retail investors are likely to gravitate toward products that offer staking yields, as they present a more compelling investment opportunity.”

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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