REX Shares in collaboration with Osprey Funds has broken through in crypto finance by going to the SEC to put out staking focused Ethereum and Solana ETFs. These funds will see to it that the traditional investment models are combined with what the block chain has to offer, a move which may in fact transform how digital assets are made available to both institutional and retail investors.
REX Shares Introduces First Staking-Focused ETFs
Proposed out of the gate are ETFs which put forth exposure to crypto prices and also a play on staking rewards, a move which we don’t see in present market players. Each of these ETFs will put out at least 80% into Ethereum or Solana with at least 50% of those holdings staked on their respective networks.
Anchorage Digital Bank the single out of which is federally charters for crypto is what will run the staking infrastructure. CEO Nathan McCauley put forth this as a new front in crypto ETFs. This structure which they have put in place enables network participation at the same time as it provides liquidity via traditional exchanges for yield hungry investors.
REX Shares Spurs Regulatory Debate
The tax strategy of the filing is non-traditional. As C corporations the ETFs report a 21% federal tax on stake income. But we see that dividends paid out to shareholders are qualified and taxed at 20%. This smart work around also gets around SEC restrictions related to direct staking services.
Despite that, we see that regulation is still an issue. SEC Chair Gary Gensler has been against staking-as-a-service which he says breach securities laws. The structure which puts in place a regulated partner in effect a work around. Also what we see is that from 6 to 18 month approval time which again will depend on the SEC’s reaction.
Market Disruption And Competitive Advantage
REX Shares’ may transform the crypto staking and traditional income markets. As opposed to direct staking or income generating ETFs which are present,
- Daily liquidity
- Institutional-grade custody
- Tax advantages for retirement accounts
With an expected return of 3.5 – 5.2% the ETFs put forth a great option in comparison to traditional income investments like REITs or Treasury ETFs. But they do present greater risk which includes validator penalties and changing network protocols.
Risks And Opportunities Ahead
Investors have to consider the risk of large penalties and also the issue of centralized validator control as well as double taxation with the C corp model. Also if approved these products could be the base which institutions use to get into crypto within a regulated environment.
Greg King the CEO of Osprey Funds defended the approach as very much so and ahead of the curve. Legal experts are reserved in their support mostly because this is still untested to field in the courts.
Still should it happen, competitors to BlackRock and Grayscale will jump in which may see us get a $15 billion staking ETF market by 2026. For the time being REX Shares has thrown out the first stone, they have put forward traditional finance into the crypto space which may in fact revamp the asset class as a whole.
