Essential Insights
Grayscale has connected traditional finance with decentralized cryptocurrency by introducing the first publicly traded staking investment vehicle.
The staking-enabled ETPs allow investors to earn blockchain rewards without the need for managing validator nodes or dealing with complex technical and custody risks.
Grayscale’s Ether and Solana ETPs are the first in the US to merge spot crypto exposure with staking rewards, providing yields through the fund’s NAV or direct distributions.
These products encounter operational challenges, including validator performance issues and liquidity lock-ups, alongside regulatory and centralization risks associated with institutional staking.
Historically, Wall Street and the cryptocurrency sector have functioned in distinct realms. While Wall Street has been defined by traditional finance and established regulatory frameworks, the crypto industry evolved around decentralized systems and fluctuating regulations. This gap is closing, thanks to the inception of the first publicly traded investment vehicle dedicated to staking cryptocurrency.
Launched by Grayscale Investments, a leading digital asset manager, this staking-enabled exchange-traded product (ETP) marks a new chapter in the integration of crypto with traditional finance. It transcends being just a fund; it acts as a bridge for traditional investors to access the burgeoning potential of crypto staking in a regulated manner.
This article explores what crypto staking entails, the barriers to greater institutional involvement, and how Grayscale is fostering the institutionalization of crypto investment. It also emphasizes regulatory and market transitions concerning staking and elucidates how Grayscale’s spot crypto ETPs deliver staking yields to investors. Furthermore, it discusses the risks linked to staking funds and illustrates how Grayscale’s ETPs are transforming crypto from a price-tracking asset to an income-generating one.
Understanding Crypto Staking and Institutional Barriers
Crypto staking involves locking up digital assets like Ether (ETH) or Solana (SOL) to assist in securing and validating transactions on proof-of-stake (PoS) blockchains. In return, participants receive rewards — analogous to earning interest — for contributing to network operations.
In contrast to Bitcoin’s proof-of-work (PoW) model, which relies on energy-intensive mining, PoS systems utilize staked capital and validator performance rather than computing power, rendering them considerably more energy-efficient and accessible to a broader range of participants.
Generally, both retail and institutional investors prefer buying and holding tokens for price appreciation rather than staking them. Operating validator nodes necessitates considerable capital, technical expertise, and constant uptime. It also exposes stakeholders to risks like slashing penalties and custody issues. Moreover, in numerous jurisdictions, the regulatory framework surrounding staking rewards remains ambiguous.
Fun Fact: The first US Bitcoin futures exchange-traded fund (ETF), the ProShares Bitcoin Strategy ETF (BITO), debuted on Oct. 19, 2021, trading over $1 billion in volume on its inaugural day.
Grayscale’s Influence in Crypto Institutionalization
Grayscale has been pivotal in the institutionalization of crypto. Established in 2013, it has evolved into one of the largest digital asset investment platforms globally, managing over $35 billion in assets. It has now unveiled staking-enabled products that incorporate blockchain yield mechanics within Wall Street’s traditional frameworks.
By providing regulated and user-friendly investment options, Grayscale enables investors to gain exposure to cryptocurrencies without the complications of managing wallets, operating nodes, or confronting validator risks. Through staking-enabled offerings like the Grayscale Ethereum Trust (ETHE) and Grayscale Solana Trust (GSOL), Grayscale has merged the yield-generating capabilities of blockchain networks with the regulatory and custodial standards prevalent in traditional finance.
Utilizing trusted custodians, a diversified validator network, and transparent reporting, Grayscale has created a secure and compliant means for investors to engage in staking. It has transitioned staking from a complicated, retail-focused process into a professional investment opportunity.
Fun Fact: After years of denials, the US sanctioned its first spot Bitcoin (BTC) ETFs in January 2024 — a significant milestone in Wall Street’s acceptance of crypto.
The Crux: Regulatory and Market Transformations
Grayscale’s launch of staking-enabled funds signifies an important milestone shaped by evolving regulatory oversight and escalating market competition. In May 2025, the US Securities and Exchange Commission provided guidance for crypto ETPs, clarifying that specific custodial staking activities may function within existing securities laws when conducted through regulated custodians and transparent structures, easing prior barriers that hindered ETFs from accruing onchain rewards.
Simultaneously, competition has heightened as major firms like BlackRock and Fidelity have entered the crypto ETF landscape, stimulating innovation. In response, Grayscale introduced staking-enabled ETPs that merge yield generation with traditional fund models. To build investor trust, it initiated educational programs, such as “Staking 101: Secure the Blockchain, Earn Rewards,” to enhance transparency and comprehension.
Fun Fact: In 2025, Ether ETFs commenced facilitating onchain staking, enabling investors to earn yields without ever needing to utilize a crypto wallet.
How Grayscale’s Spot Crypto ETPs Deliver Staking Yield to Investors
Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Mini Trust (ETH) are spot Ether ETPs that now support onchain staking. Grayscale Solana Trust (GSOL) has also activated staking while trading over the counter. Together, these offerings represent the first US-listed products that amalgamate spot crypto exposure with staking rewards.
Each fund features a distinct reward structure. ETHE allocates staking rewards directly to investors, while ETH and GSOL embed rewards into the fund’s net asset value (NAV), gradually affecting share prices. After deducting custodian and sponsor fees, investors receive a net yield from validator rewards.
Operationally, Grayscale employs institutional custodians and a diverse network of validator providers for passive staking, helping to manage risks like slashing or downtime while supporting liquidity. Clear disclosures, reporting, and compliance with regulatory frameworks bolster investor confidence.
Grayscale staked 32,000 ETH (roughly $150 million) a day after enabling staking for its Ether ETPs, becoming the first US crypto fund issuer to provide staking-based passive income through US-listed spot products.
Risks and Critiques of Grayscale’s Staking Funds
Regulatory ambiguity remains a significant concern for staking-enabled products. In contrast to 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 requirements. GSOL, which is still traded over the counter, is awaiting regulatory approval for listing, leading to uncertainty regarding its long-term status and oversight. Future policy shifts or stricter SEC enforcement could further complicate the model or restrict staking within regulated funds.
Operationally, risks such as validator performance, slashing occurrences, and downtime are ongoing. Balancing liquidity with staking lock-ups and ensuring equitable, transparent distribution of rewards among shareholders adds further complexity to fund management.
Market acceptance poses another challenge. The performance of staking-enabled ETPs against Ether ETFs remains to be seen.
Decentralization issues are also vital. Institutional staking could amplify validator control, conferring sizable funds disproportionate influence over governance and network security on underlying blockchains, which opposes the core principles of decentralization.
How Grayscale’s ETPs Transform Crypto from Price Tracker to Income Asset
Grayscale’s staking-enabled ETPs have significantly influenced Wall Street and the wider crypto ecosystem. They connect blockchain-based yield with regulated financial products, evolving crypto ETPs from mere price trackers into income-generating assets. This initiative signifies a crucial advancement in institutional adoption. Regulated staking on Ethereum and Solana could attract substantial new capital to these networks while serving as a template for products linked to other PoS blockchains or tokenized assets.
At the network level, institutional staking could bolster security and protocol stability. However, it may incite concerns regarding centralization if large funds dominate validator roles, potentially affecting yields and governance balance. Grayscale’s staking-enabled ETPs are set to influence upcoming funds, shaping standards for transparency, risk disclosures, taxation, and investor protections.
This article does not constitute investment advice or recommendations. Every investment and trading move carries risks, and readers should perform their own research before making decisions.
