Main Insights
Grayscale has connected traditional finance with decentralized cryptocurrency by launching the first publicly traded investment vehicle focused on staking.
The staking-enabled ETPs allow investors to earn blockchain rewards without the need to run validator nodes or tackle intricate technical and custody challenges.
Grayscale’s Ether and Solana ETPs are the first in the US to integrate spot crypto exposure alongside staking rewards, distributing yields through the fund’s NAV or direct payments.
These products encounter operational hurdles, such as validator performance and liquidity lock-ups, along with regulatory and centralization risks tied to institutional staking.
Historically, Wall Street and the cryptocurrency sector have operated independently. While Wall Street is marked by traditional finance and established regulations, the crypto world has evolved around decentralized structures and varying regulations. This gap is closing with the introduction of the first publicly traded investment vehicle dedicated to cryptocurrency staking.
Launched by Grayscale Investments, a leading digital asset management firm, this staking-enabled exchange-traded product (ETP) marks a new era of maturation and integration between crypto and traditional finance. It serves not merely as a fund but as a bridge for traditional investors to access regulated avenues for the growth potential of crypto staking.
This article explores what crypto staking is, the obstacles to greater institutional involvement, and how Grayscale has advanced the institutional adoption of crypto investments. It discusses regulatory and market shifts surrounding staking and elucidates how Grayscale’s spot crypto ETPs yield returns for investors. Finally, it highlights the risks associated with staking funds and illustrates how Grayscale’s ETPs have transformed crypto from a price-tracking asset into an income-generating one.
Understanding Crypto Staking and Institutional Barriers
Crypto staking entails committing digital assets like Ether (ETH) or Solana (SOL) to secure and validate transactions on proof-of-stake (PoS) blockchains. Participants earn rewards—similar in concept to interest—by supporting network operations.
In contrast to Bitcoin’s proof-of-work (PoW) model, which relies on energy-consuming mining, PoS systems function differently. They depend on staked capital and validator performance instead of computational power, making them more energy-efficient and accessible to a broader audience.
Generally, both retail and institutional investors prioritize acquiring and holding tokens for price appreciation over staking. Running validator nodes involves significant capital, technical expertise, and continuous uptime, exposing participants to risks like slashing penalties and custody issues. Additionally, the regulatory treatment of staking rewards remains ambiguous in many regions.
Did you know? The first US Bitcoin futures exchange-traded fund (ETF), the ProShares Bitcoin Strategy ETF (BITO), debuted on Oct. 19, 2021, with over $1 billion traded on its opening day.
Grayscale’s Influence on Crypto Institutionalization
Grayscale has been pivotal in driving the institutional adoption of crypto. Established in 2013, it has become one of the largest digital asset investment platforms, managing assets exceeding $35 billion. Its launch of staking-enabled products brings blockchain yield mechanisms into the traditional financial landscape.
By offering regulated and user-friendly investment solutions, Grayscale enables investors to gain cryptocurrency exposure without the challenges of managing wallets, operating nodes, or confronting validator risks. Through staking-enabled products like the Grayscale Ethereum Trust (ETHE) and Grayscale Solana Trust (GSOL), the firm has merged the yield-producing capabilities of blockchain networks with the regulatory and custodial norms of traditional finance.
Employing trusted custodians, a diverse network of validator partners, and transparent reporting, Grayscale has created a secure and compliant means for investors to engage in staking, converting a complex, retail-oriented process into a professional investment opportunity.
Did you know? After a series of rejections, the US approved its inaugural spot Bitcoin (BTC) ETFs in January 2024, marking a significant milestone in Wall Street’s acceptance of crypto.
A Pivotal Moment: Regulatory and Market Changes
Grayscale’s launch of staking-enabled funds signifies a crucial milestone influenced by evolving regulatory oversight and increasing market competition. In May 2025, the US Securities and Exchange Commission clarified that certain custodial staking activities could fit within existing securities laws if managed by regulated custodians in transparent structures. This clarification has alleviated previous obstacles preventing ETFs from earning on-chain rewards.
Market competition has surged, with major players like BlackRock and Fidelity entering the crypto ETF field, spurring innovation. In response, Grayscale introduced staking-enabled ETPs that integrate yield generation with conventional fund structures. To build investor confidence, it initiated educational efforts such as “Staking 101: Secure the Blockchain, Earn Rewards” to foster transparency and comprehension.
Did you know? In 2025, Ether ETFs began facilitating on-chain staking, enabling investors to earn yield without ever needing to interact with a crypto wallet.
How Grayscale’s Spot Crypto ETPs Provide Staking Yield to Investors
The Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Mini Trust (ETH) are spot Ether ETPs now supporting on-chain staking. The Grayscale Solana Trust (GSOL) has also enabled staking, trading over the counter. Collectively, these offerings represent the first US-listed products to merge spot crypto exposure with staking rewards.
Each fund has a distinct reward structure. ETHE distributes staking rewards directly to investors, while ETH and GSOL embed rewards within the fund’s net asset value (NAV), gradually affecting share value. After accounting for custodian and sponsor fees, investors receive a net yield from validator rewards.
Grayscale leverages institutional custodians and a diverse network of validator providers for passive staking, which aids in risk management regarding slashing or downtime while ensuring liquidity. Transparent disclosures, reporting, and adherence to regulatory guidelines bolster investor confidence.
Grayscale staked 32,000 ETH (approximately $150 million) just a day after enabling staking for its Ether ETPs, becoming the first US crypto fund issuer to provide staking-based passive income via US-listed spot products.
Challenges and Criticisms of Grayscale’s Staking Funds
Regulatory ambiguity remains a significant concern for staking-enabled assets. Unlike fully registered ETFs under the Investment Company Act of 1940, Grayscale’s ETHE and ETH are structured as ETPs with varying investor protections and disclosure protocols. GSOL, currently traded over the counter, is pending regulatory approval for uplisting, resulting in uncertainty about its future status and oversight. Future regulatory changes or stricter SEC enforcement might further complicate the framework or restrict staking within regulated funds.
Operationally, risks such as validator performance, slashing events, and downtime are ongoing challenges. Balancing liquidity with staking lock-ups, as well as ensuring fair and transparent reward distribution among shareholders, complicates fund management further.
Adoption in the market presents another hurdle, as it remains to be seen how staking-enabled ETPs will compete against Ether ETFs.
Concerns about decentralization also loom large. Institutional staking could amplify validator control, granting significant funds an excessive influence over governance and network security on the underlying blockchains, contradicting the foundational principles of decentralization.
Transforming Crypto from a Price Tracker to an Income Asset with Grayscale’s ETPs
Grayscale’s staking-enabled ETPs have made a substantial impact on Wall Street and the broader crypto landscape, linking blockchain-derived yields with regulated financial offerings, successfully converting crypto ETPs from mere price trackers into income-generating assets. This initiative symbolizes a critical advancement in institutional adoption. Regulated staking on Ethereum and Solana could attract significant new capital to these networks while providing a framework for similar products connected to other PoS blockchains or tokenized assets.
At the network level, institutional staking may bolster security and stability of protocols. However, it could also raise concerns regarding centralization if large funds dominate validator responsibilities, potentially affecting yields and governance balance. Grayscale’s staking-enabled ETPs are poised to influence future funds, shaping standards for transparency, risk disclosures, taxation, and investor protections.
This article does not constitute investment advice or recommendations. All investments and trading decisions carry risk, and readers should undertake their own research prior to making decisions.
