Key takeaways
-
Grayscale has brought together traditional finance and decentralized cryptocurrencies by launching the first publicly traded staking investment vehicle.
-
Its staking-enabled ETPs allow investors to earn blockchain rewards without running validator nodes or managing complex technical and custody risks.
-
Grayscale’s Ether and Solana ETPs are the first in the US to combine spot exposure to cryptocurrencies with staking rewards, paying returns through the fund’s NAV or direct payments.
-
These products face operational challenges, such as validator performance issues and liquidity locks, as well as regulatory and centralization risks linked to institutional staking.
Wall Street and the cryptocurrency world have long operated in separate spaces. While Wall Street was defined by traditional finance and clear regulatory rules, the crypto industry evolved around decentralized systems and changing regulations. That gap is now narrowing thanks to the launch of the first publicly traded investment vehicle dedicated to staking cryptocurrencies.
Launched by Grayscale Investments, one of the largest digital asset managers, this staking-enabled exchange-traded product (ETP) signals a new phase in the maturation and integration of cryptocurrencies with traditional finance. It is more than a background; is a bridge that provides traditional investors with a regulated path to harness the growth potential of cryptocurrencies.
This article looks at what crypto staking is, what has prevented greater institutional participation, and how Grayscale has encouraged the institutionalization of crypto investing. It also highlights regulatory and market changes around staking and explains how Grayscale’s spot crypto ETPs offer staking returns to investors. Finally, it outlines the risks associated with participating in funds and shows how Grayscale ETPs have transformed cryptocurrencies from a price-tracking asset to an income-generating one.
Crypto participation and institutional barriers
Crypto staking involves pledging digital assets like Ether (ETH) or Solana (SOL) to help secure and validate transactions on proof-of-stake (PoS) blockchains. In exchange, participants earn rewards (similar in concept to earning interest) for supporting the network’s operations.
Unlike Bitcoin’s proof-of-work (PoW) model, which relies on energy-intensive mining, PoS systems work differently. They depend on staked capital and validator performance more than computing power. This design makes them much more energy efficient and accessible to a wider range of participants.
Overall, both retail and institutional investors continue to focus on buying and holding tokens to drive prices up rather than staking them. Operating validation nodes requires substantial capital, technical know-how, and uninterrupted uptime. It also exposes participants to risks such as reduced sentences and custody challenges. Furthermore, in many jurisdictions, the regulatory treatment of gambling rewards remains unclear.
Did you know? The first US Bitcoin futures exchange-traded fund (ETF), the ProShares Bitcoin Strategy ETF (BITO), launched on October 19, 2021 and traded over $1 billion in volume on its first day.
The role of grayscale in the institutionalization of cryptocurrencies
Grayscale has played a central role in the institutionalization of cryptocurrencies. Founded in 2013, it has become one of the largest digital asset investment platforms in the world, managing over $35 billion in assets. It has now launched staking-enabled products that incorporate blockchain performance mechanics into the traditional Wall Street framework.
By offering regulated, easy-to-use investment products, Grayscale allows investors to gain exposure to cryptocurrencies without the challenges of managing wallets, operating nodes, or dealing with validator risks. Through staking-enabled offerings such as Grayscale Ethereum Trust (ETHE) and Grayscale Solana Trust (GSOL), Grayscale has integrated the yield-generating features of blockchain networks with the regulatory and custody standards of traditional finance.
By utilizing trusted custodians, a diversified network of validator partners, and transparent reporting, Grayscale has established a secure and compliant way for investors to participate in staking. It has turned betting from a complex, retail-oriented process into a professional investment opportunity.
Did you know? After years of rejections, the US approved its first Bitcoin spot (btc) ETF in January 2024: a major milestone in Wall Street’s acceptance of cryptocurrencies.
The turning point: regulatory and market changes
The introduction of participation-enabled funds at Grayscale marks a key milestone shaped by evolving oversight and increasing market competition. The US Securities and Exchange Commission issued guidance for crypto ETPs in May 2025, clarifying that certain custodian activities can operate within existing securities laws when managed through regulated custodians and transparent structures. This development has alleviated previous barriers that prevented ETFs from earning on-chain rewards.
Meanwhile, competition has intensified as major players like BlackRock and Fidelity have entered the crypto ETF space, driving innovation. In response, Grayscale launched staking ETPs that combine yield generation with traditional fund frameworks. To improve investor confidence, it launched educational initiatives such as “Stake 101: Secure the Blockchain, Earn Rewards” to promote transparency and understanding.
Did you know? By 2025, Ether ETF began allowing on-chain staking, allowing investors to earn returns without even touching a crypto wallet.
How Grayscale Spot Crypto ETPs Are Delivering Returns to Investors
Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Mini Trust (ETH) are Ether spot ETPs that now support on-chain staking. Grayscale Solana Trust (GSOL) has also allowed staking while trading in the over-the-counter market. Together, these offerings are the first US-listed products to combine spot exposure to cryptocurrencies with staking rewards.
Each fund features a unique reward structure. ETHE pays staking rewards directly to investors, while ETH and GSOL embed rewards into the fund’s net asset value (NAV), gradually affecting the share price. After deductions for custodian and sponsor fees, investors receive a net return on validator rewards.
Operationally, Grayscale uses institutional custodians and a diversified network of validator providers for passive staking. This setup helps manage risks such as outages or downtime while supporting liquidity. Clear disclosures, reporting and compliance with regulatory frameworks improve investor confidence.
Grayscale staked 32,000 ETH (around $150 million) a day after enabling staking for its Ether ETPs, making it the first US crypto fund issuer to offer staking-based passive income through US-listed spot products.
Risks and criticism of Grayscale participation funds
Regulatory uncertainty remains a key issue for betting-enabled products. Unlike ETFs that are fully registered under the Investment Company Act of 1940, Grayscale’s ETHE and ETH are structured as ETPs with different investor protections and disclosure requirements. GSOL, which is still listed over-the-counter, is awaiting regulatory approval for listing, raising uncertainty over its long-term status and oversight. Future policy changes or stricter SEC enforcement could further complicate the model or limit betting within regulated funds.
Operationally, risks such as validator performance, reduction events, and downtime remain. Balancing liquidity with blocking staking and ensuring fair and transparent distribution of rewards among shareholders adds further complexity to fund management.
Market adoption poses another challenge. It is necessary to see how staking-enabled ETPs perform when competing with Ether ETFs.
Concerns about decentralization are also important. Institutional staking can enhance validator control, giving large funds enormous influence over the governance and network security of underlying blockchains. This would go against the basic principles of decentralization.
How Grayscale ETPs Transform Cryptocurrencies from a Price Tracker to an Income Asset
Grayscale staking-enabled ETPs have had a significant impact on Wall Street and the broader crypto ecosystem. It connects blockchain-based performance with regulated financial products, turning crypto ETPs from simple price trackers into income-generating assets. The initiative marks a key advance in institutional adoption. Regulated staking on Ethereum and Solana could attract substantial new capital to these networks while also acting as a model for products linked to other PoS blockchains or tokenized assets.
At the network level, institutional participation could improve the security and stability of the protocol. However, it may raise concerns about centralization if large funds dominate validation functions. This could affect returns and the balance of governance. Grayscale staking ETPs will shape upcoming funds, influencing standards of transparency, risk disclosure, taxes and safeguards for investors.
This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.
