REX Shares and Osprey Funds File for Staking Ethereum and Solana ETFs

Staking the Future: REX Shares and Osprey Funds Pioneer Ethereum and Solana ETFs

REX Shares and Osprey Funds have filed with the SEC to launch groundbreaking exchange-traded funds (ETFs) that will not only track Ethereum and Solana but also incorporate staking rewards. This move, enabled by recent SEC clarity on crypto staking, marks a significant step towards integrating digital assets more deeply into traditional finance, offering investors new avenues for yield generation.

A New Era for Crypto ETFs

This development signifies a pivotal moment for the cryptocurrency market, particularly for ETFs. While spot Bitcoin and Ethereum ETFs have gained traction, the inclusion of staking capabilities introduces a new dimension for investors seeking yield from their digital asset holdings. The filings by REX Shares and Osprey Funds aim to capitalize on this, offering products that could reshape the landscape of crypto investment vehicles.

Key Takeaways

• Staking Integration: The proposed ETFs will stake a portion of their Ethereum and Solana holdings, generating rewards for investors.

• Faster Path to Market: These ETFs are structured under the Investment Company Act of 1940 ("40-Act"), which allows for a potentially quicker approval process compared to the traditional 19b-4 route.

• First Spot Solana ETF: The REX Shares filing could also mark the debut of the first spot Solana ETF in the U.S., as only futures-based products currently exist.

• SEC Clarity on Staking: Recent guidance from the SEC, exempting common forms of crypto staking from securities registration, has paved the way for these innovative products.

Regulatory Landscape and Implications

The SEC's recent clarification on crypto staking has been instrumental in enabling these filings. The agency's Division of Corporation Finance confirmed that various forms of staking do not require registration under securities laws. This guidance, while welcomed by many, has also faced some internal dissent within the SEC regarding its interpretation of existing legal standards like the Howey Test.

For the ETF market, this clarity removes a significant regulatory hurdle. Previously, the SEC had been hesitant to approve products that allowed issuers to stake underlying holdings. The new guidance, however, opens the door for more sophisticated crypto investment products that can offer yield to investors, potentially attracting a broader range of participants to the digital asset space.

Structure and Custody

The proposed ETH and SOL funds will invest at least 80% of their net assets in their respective reference assets and stake at least 50% of their holdings. Anchorage Digital, a federally chartered bank, will provide custodial support for these funds, ensuring secure storage and staking operations. This partnership highlights the increasing collaboration between traditional financial institutions and crypto service providers to meet the demands of regulated digital asset products.

Notably, these funds will be treated as a "regular C corporation" for U.S. federal income tax purposes, rather than a "regulated investment company." This distinction means that staking distributions to holders will be treated as dividend income, a detail that investors will need to consider.

What's Next?

While the exact launch dates are not yet confirmed, analysts anticipate these funds could begin trading in the coming weeks. The successful launch of staking ETFs for Ethereum and Solana could set a precedent for similar products across other proof-of-stake cryptocurrencies, further expanding the accessibility and utility of digital assets within regulated financial markets.

Sources

• SEC ruling eases path for Ethereum staking in ETFs, CryptoSlate.

• REXShares Files for Solana & Ethereum Staking ETFs in US, The Crypto Times.

• REX Shares and Osprey Funds file with SEC to offer staking Ethereum and Solana ETFs, The Block.