Key takeaways
Grayscale has connected traditional finance and decentralized crypto by introducing the first publicly traded staking investment vehicle.
Their staking-enabled ETPs enable investors to earn blockchain rewards without having to operate validator nodes or navigate complex technical and custody risks.
Grayscale’s Ether and Solana ETPs are the first in the US offering both spot crypto exposure and staking rewards, delivering yields through the fund’s NAV or direct payouts.
These products encounter operational challenges, including validator performance issues and liquidity lock-ups, along with regulatory and centralization risks associated with institutional staking.
Historically, Wall Street and the crypto sector functioned in distinct realms. Wall Street was marked by traditional finance and well-defined regulatory standards, while the crypto landscape developed around decentralized systems and fluctuating regulations. This divide is being bridged with the introduction of the first publicly traded investment vehicle focused on staking cryptocurrency.
Launched by Grayscale Investments, one of the largest digital asset managers, this staking-enabled exchange-traded product (ETP) heralds a new phase in the evolution of crypto and its integration with traditional finance. It serves as more than just a fund; it acts as a bridge offering traditional investors a regulated route to access the growth potential of crypto staking.
This article explores the concept of crypto staking, the barriers hindering greater institutional interest, and how Grayscale has facilitated the mainstreaming of crypto investment. It also highlights the regulatory and market developments surrounding staking and elucidates how Grayscale’s spot crypto ETPs offer staking yields to investors. Lastly, it outlines the risks linked to staking funds and demonstrates how Grayscale’s ETPs have transformed crypto from merely a price-tracking asset to one that generates income.
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. In return, participants receive rewards—akin to earning interest—for supporting network operations.
In contrast to Bitcoin’s proof-of-work (PoW) approach, which relies on energy-hungry mining, PoS systems function differently. They are dependent on staked capital and validator performance rather than computational power. This architecture makes them significantly more energy-efficient and accessible to a broader range of participants.
Overall, both retail and institutional investors still tend to focus on buying and holding tokens for price appreciation instead of staking them. Running validator nodes necessitates considerable capital, technical expertise, and continuous uptime. It also exposes participants to risks such as slashing penalties and custody challenges. Furthermore, in many regions, the regulatory status of staking rewards remains ambiguous.
Did you know? The first US Bitcoin futures exchange-traded fund (ETF), the ProShares Bitcoin Strategy ETF (BITO), debuted on Oct. 19, 2021, and surpassed $1 billion in volume on its first day.
Grayscale’s role in crypto institutionalization
Grayscale has been pivotal in the institutionalization of crypto. Established in 2013, it has evolved into one of the world’s largest digital asset investment platforms, managing over $35 billion in assets. Grayscale has now introduced staking-enabled products that integrate blockchain yield mechanics into the traditional framework of Wall Street.
By providing regulated and user-friendly investment options, Grayscale allows investors to gain cryptocurrency exposure without confronting the complexities of managing wallets, running nodes, or handling validator risks. Through staking-enabled offerings like the Grayscale Ethereum Trust (ETHE) and Grayscale Solana Trust (GSOL), Grayscale has fused the yield-generating capabilities of blockchain networks with the regulatory and custody standards of traditional finance.
By utilizing trusted custodians, a diverse network of validator partners, and transparent reporting, Grayscale has created a safe and compliant manner for investors to partake in staking. It has transformed staking from a complex, retail-centric activity into a professional investment opportunity.
Did you know? After years of rejections, the US approved its first spot Bitcoin (BTC) ETFs in January 2024 — a significant milestone in Wall Street’s embrace of crypto.
The turning point: Regulatory and market shifts
Grayscale’s launch of staking-enabled funds represents a major milestone influenced by changing regulations and increasing market competition. The US Securities and Exchange Commission clarified guidelines for crypto ETPs in May 2025, indicating that certain custodial staking activities could comply with existing securities laws when conducted through regulated custodians and transparent frameworks. This change has alleviated previous obstacles that thwarted ETFs from earning on-chain rewards.
Furthermore, competition has intensified as major firms like BlackRock and Fidelity have entered the crypto ETF landscape, heralding innovation. In response, Grayscale introduced staking-enabled ETPs that merge yield generation with traditional fund structures. To bolster investor confidence, it initiated educational programs such as “Staking 101: Secure the Blockchain, Earn Rewards” to foster transparency and understanding.
Did you know? In 2025, Ether ETFs allowed on-chain staking, enabling investors to earn yield without ever engaging with a crypto wallet.
How Grayscale’s spot crypto ETPs are delivering staking yield to investors
Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Mini Trust (ETH) are spot Ether ETPs that now support on-chain staking. Grayscale Solana Trust (GSOL) has also activated staking while trading over the counter. Collectively, these offerings are the first US-listed products to merge spot crypto exposure with staking rewards.
Each fund features a distinct reward system. ETHE distributes staking rewards directly to investors, while ETH and GSOL integrate rewards into the fund’s net asset value (NAV), incrementally affecting share price. After custodial and sponsor fees are deducted, investors receive a net yield derived from validator rewards.
From an operational standpoint, Grayscale employs institutional custodians and a diversified network of validator providers for passive staking. This setup manages risks such as slashing or downtime while also supporting liquidity. Clear disclosures, reporting, and adherence to regulatory structures bolster investor trust.
Grayscale staked 32,000 ETH (approximately $150 million) a day after enabling staking for its Ether ETPs, making it the first US crypto fund issuer to provide staking-based passive income through US-listed spot products.
Risks and criticisms of Grayscale’s staking funds
Regulatory ambiguity continues to be a major concern for staking-enabled products. 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 standards. GSOL, currently traded over the counter, is pending regulatory approval for uplisting, adding to uncertainty surrounding its long-term status and oversight. Future policy changes or stricter SEC actions could further complicate the model or restrict staking within regulated funds.
Operationally, challenges such as validator performance, slashing incidents, and downtime remain persistent. Striking a balance between liquidity and staking lock-ups while ensuring fair and transparent reward distribution among shareholders adds additional complexity to fund management.
Market acceptance is another hurdle. It remains to be seen how staking-enabled ETPs will perform in competition with Ether ETFs.
Concerns about decentralization are also significant. Institutional staking may increase validator control, giving large funds disproportionate influence over governance and network security of the underlying blockchains, which contradicts the foundational principles of decentralization.
How Grayscale’s ETPs transform crypto from price tracker to income asset
Grayscale’s staking-enabled ETPs have profoundly influenced Wall Street and the wider crypto ecosystem. They establish a connection between blockchain-generated yield and regulated financial instruments, converting crypto ETPs from mere price trackers into income-generating assets. This initiative signifies a notable advancement in institutional adoption. Regulated staking on Ethereum and Solana could attract significant new capital to these networks while providing a template for similar products linked to other PoS blockchains or tokenized assets.
At the network level, institutional staking may enhance security and protocol stability. However, it may raise concerns regarding centralization if substantial funds dominate validator positions. This could impact yields and governance equilibrium. Grayscale’s staking-enabled ETPs will influence the development of upcoming funds, shaping standards for transparency, risk disclosures, taxation, and investor protections.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
