Nearly a year after the SEC approved spot Ethereum ETFs (exchange-traded funds), the landscape may be shifting again.
BlackRock’s latest push—to enable the staking mechanism that generates rewards for shareholders and to offer redemption options beyond cash—could pave the way for a more dynamic, and potentially more lucrative, ETF structure.
BlackRock’s digital assets strategy
BlackRock’s interest in Ethereum is part of a wider push into digital assets. After launching its spot Bitcoin ETF in January of last year, one of the most successful ETF debuts in recent years, the firm quickly turned its focus to Ethereum. CEO Larry Fink has described tokenization and blockchain as central to the future of investing, and BlackRock’s actions suggest it is serious about leading that shift. BlackRock’s discussions with the SEC suggest it is not just looking to offer basic crypto exposure; it wants to build products that reflect how these technologies actually work.
From restriction to reform
When Ethereum spot ETFs got the SEC green light in July 2024, they came with strings attached.
- Staking, a core feature of Ethereum’s proof-of-stake protocol, was prohibited.
- Redemption was required to be in cash rather than in-kind, giving regulators tighter control and oversight.
These constraints reflected the SEC’s cautious stance. Ethereum’s decentralized applications, smart contracts, and its shift to proof-of-stake posed regulatory complexities not present in Bitcoin-based products.
That position now appears to be softening.
BlackRock leads the charge
On 9 May, BlackRock met with the SEC’s Crypto Asset Securities Working Group to propose key enhancements to its Ethereum ETF, “ETHA”, according to an SEC memorandum. The firm is seeking permission to allow both staking and in-kind redemptions — changes that could fundamentally reshape how institutional investors engage with Ethereum.
The following day, BlackRock submitted an amended registration filing to formalize the request.
In-kind redemptions would allow ETF shares to be exchanged directly for ETH, rather than converting to cash first. This can reduce slippage—the small losses that occur when prices move during a trade—and avoids triggering taxable events, such as capital gains taxes that arise when assets are sold for a profit. If allowed, staking would let the ETF actively participate in Ethereum’s network and pass the resulting rewards on to shareholders.
The result could be a more efficient product that aligns more closely with Ethereum’s native design, capturing not just its value, but its role as a productive, reward-generating part of a decentralized network.
Ethereum reacted quickly. On 9 May, ETH opened at $2,205 and surged to a high of $2,364, a 7 percent intraday gain. The rally intensified the next day, reaching a high of $2,582 — a two-day move of 17 percent.
Regulatory signals
On 21 May, the SEC formally acknowledged BlackRock’s updated filing and opened a 240-day comment period. While procedural, markets interpreted it as a signal that regulators are open to further discussion.
Ethereum rallied again, climbing from $2,471 to $2,647 on May 21 — a 6.3 percent gain. The momentum continued into 22 May, with ETH reaching $2,734 before closing at $2,721, up another 3.6 percent.
Inflows confirm institutional appetite
Ethereum ETFs have received a combined net inflow of $110 million since the start of May, surpassing January’s $101 million, according to data from CoinGlass. This rapid acceleration of inflows suggests growing institutional conviction in Ethereum’s role as a foundational digital asset.
This isn’t just about short-term price movement. It points to Ethereum becoming a structural part of multi-asset investment portfolios.
Regulatory turning point?
BlackRock’s proposals, along with the SEC’s willingness to consider them, may signal a broader shift in how digital assets are handled within the regulated financial system.
Staking was never expected to be on the table in the first wave of approvals. Its potential inclusion now highlights a regulatory approach that is starting to account for the unique characteristics of Ethereum. For fund managers, this means the potential for more competitive and efficient products. For investors, it opens the door to more authentic exposure. For regulators, it presents a chance to balance innovation with oversight.
This is no longer about whether Ethereum belongs in regulated markets. It’s about how far those markets are willing to adapt.
