In a significant move for institutional investment in Ethereum, BlackRock is advancing its plans for an Ethereum ETF that incorporates staking and total returns. The world”s largest asset manager is exploring a structured integration of ETH staking into its exchange-traded products, following the filing of the iShares Staked Ethereum Trust ETF (ETHB).
Sources close to the developments indicate that this new proposal aims to address limitations observed in the initial spot Ethereum ETFs approved in 2024. Those early versions only provided exposure to price fluctuations, neglecting the annual yields generated by the Ethereum network. The newly designed ETHB fund will allocate between 70% and 95% of its Ether holdings to staking, while keeping a portion liquid to facilitate redemptions.
This initiative positions the ETF as a total return instrument, merging market appreciation with on-chain rewards, which is a compelling feature for institutional investors. The announcement that approximately “82%” or “83%” of staking rewards would be passed on to shareholders sparked some misunderstandings in the market. This percentage refers to the portion of total staking rewards distributed to investors, not the annual yield itself.
Historically, ETH staking has yielded returns ranging between 3% and 4.5% per year. Based on the proposed structure, investors could potentially realize additional annual returns of about 2.5% to 3.7% on their Ethereum exposure, alongside price appreciation.
By integrating staking, the ETHB ETF transitions from merely reflecting ETH price movements to resembling a digital asset with inherent yield, which is particularly appealing to pension funds, university endowments, and long-term asset managers. This combination of recurring income and regulated exposure enhances the asset”s allure within structured allocation strategies.
Operationally, BlackRock plans to collaborate with established institutional providers such as Coinbase Prime and Figment to manage validators and distribute rewards. This partnership with professional infrastructure mitigates the technical complexities typically associated with direct staking.
However, regulatory challenges remain a critical consideration. The SEC”s approval is a pivotal step, as the agency has historically been cautious regarding ETFs that involve staking, particularly due to liquidity concerns and the mechanisms surrounding ETH unlock queues. If approved, this model could herald a new era in the institutionalization of cryptocurrencies, integrating Ethereum”s native yield into a rigorously regulated vehicle and enhancing ETH”s presence in traditional financial markets.
