The Rise of Staking Crypto ETFs: Why BlackRock’s New Move Could Redefine the Entire ETF Market

For years, traditional finance (TradFi) has slowly opened its doors to digital assets—starting with Bitcoin futures, then spot Bitcoin ETFs, then spot Ethereum ETFs, and now something far more transformative: staking ETFs.

In 2025, the U.S. Securities and Exchange Commission quietly approved a rule change that allowed registered ETFs to stake certain proof-of-stake (PoS) cryptocurrencies. This shift, barely imaginable a few years ago, has now triggered a wave of institutional experimentation.

And now BlackRock—the world’s largest asset manager, steward of more than $10 trillion—is entering the space with a staked Ethereum ETF that aims to stake 70% to 90% of its ETH holdings.

This isn’t just another ETF launch.

This is a signal.

A signal that Wall Street now sees staking yields as a legitimate form of income generation—on par with dividends, treasury yields, or bond coupons. A signal that ETFs are evolving from passive exposure to productive crypto assets. And a signal that the crypto market is transitioning into a phase where staking yield becomes a core component of institutional portfolios.

Let’s break down what this means, how staking ETFs actually work, why BlackRock is doing this now, and how this could reshape the crypto landscape.

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1. What Is Staking—And Why Does It Matter?

Staking is the economic backbone of all proof-of-stake blockchains.

Networks like Ethereum, Solana, and Avalanche require participants to lock up tokens to help secure the network, process transactions, and maintain consensus. In return, stakers earn rewards—typically in the form of percentage-based yield.

Why staking is attractive:

• It provides passive income (ETH staking yields ~2% annually).

• It supports network security.

• It requires no special hardware.

• It offers return streams uncorrelated with traditional asset classes.

Millions of individual crypto holders delegate to validators through:

• Exchanges (Coinbase, Kraken)

• DeFi platforms (Lido, Rocket Pool)

• Validators they run themselves

But institutions have historically been locked out.

That’s now changing.

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2. The SEC Finally Opens the Door to Staking ETFs

In early 2025, under more crypto-friendly leadership, the SEC updated guidance that previously discouraged staking in registered ETF structures. This allowed asset managers to apply for ETFs that could:

• Hold crypto

• Stake crypto

• Distribute staking rewards to shareholders

The floodgates did not fully open—but a strong, growing stream began.

The first movers included:

• REX-Osprey – first staked ETH ETF

• Grayscale – followed with its own staked ETH product

• Bitwise & Fidelity – staked Solana ETFs

• Franklin Templeton – multi-asset staking ETF proposals

Today, about $5.8 billion sits in staking-enabled ETFs—still small compared to the $140+ billion total ETF crypto market, but accelerating rapidly.

BlackRock now entering the arena could multiply those flows.

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3. Why BlackRock Is Launching a Staked Ethereum ETF Now

BlackRock tried to include staking in its first ETH ETF—but the SEC blocked it.

Now, the landscape has changed:

• Regulatory clarity around staking ETFs has improved.

• Institutional demand for yield is rising.

• ETH is increasingly viewed as a yield-bearing digital asset.

• BlackRock wants to replicate its massive Bitcoin ETF success.

BlackRock’s Bitcoin ETF (IBIT) became its single highest-revenue ETF in under two years. Its next move is obvious:

Offer yield. Offer productivity. Offer a new category of ETF that earns income simply by holding the asset.

This is identical to what made bond ETFs explode in popularity.

Ethereum staking yield may only be ~2%, but across tens of billions of dollars, it becomes meaningful.

And most importantly:

A staking ETF lets institutions access ETH without managing:

• Validators

• Slashing risk

• Unstaking periods

• Custody solutions

It is “ETH yield as a button.”

That’s extremely powerful.

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4. How Staking ETFs Actually Work

When someone buys shares of a staked ETF:

1. The ETF buys ETH (or SOL, AVAX, etc.).

2. The ETF stakes a portion of that crypto—BlackRock plans 70–90%.

3. Validators earn staking rewards.

4. Rewards are distributed to ETF shareholders (usually quarterly).

5. A portion remains unstaked for liquidity needs (redemptions, volatility).

Key players in BlackRock’s staking ETF:

• Coinbase Custody

• Anchorage Digital Bank

These institutions will manage the validators and the staking operations.

The ETF investor only sees:

• Shares going up or down in price

• Periodic yield distributions

This is exactly how bond or REIT ETFs operate.

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5. Benefits: Why Investors Want Staking ETFs

✓ Simplicity

No wallets, no staking menus, no delegation—just buy the ETF.

✓ Yield

Even a modest 2% is attractive when paired with ETH’s long-term appreciation.

✓ Regulatory comfort

Institutions get exposure inside a framework they understand.

✓ Liquidity

Unlike directly staking ETH, ETF shares can be bought and sold immediately.

✓ Institutional-grade security

Custodians handle slashing protection and validator operations.

In short:

A staked ETF turns crypto into a mainstream yield-bearing asset class.

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6. Risks and Considerations

Staking ETFs are not risk-free.

Network risks

• Slashing (though unlikely for major custodians)

• Smart contract vulnerabilities

Custodial risk

Any centralized custodian introduces counterparty exposure.

Regulatory reversals

Future SEC leadership could restrict staking again.

Tracking error

The ETF may not perfect match ETH performance due to:

• Fees

• Unstaked liquidity buffers

• Operational timing

But for most institutional investors, these risks are acceptable trade-offs.

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7. What Other Staked ETFs Exist Today?

Staked ETH ETFs

• REX-Osprey

• Grayscale

• BlackRock (pending approval)

Staked SOL ETFs

• Bitwise

• Grayscale

• Fidelity

• Franklin Templeton

Bitwise’s Solana Staking ETF surpassed $500 million AUM in less than three weeks—even during a bearish period—proving demand is real.

Expect Avalanche, Cardano, Polkadot, and Near to follow.

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8. Why Staking ETFs Could Become Massive Over the Next 24 Months

We are witnessing a structural shift:

• Traditional ETF buyers are yield-hungry.

• Crypto assets that produce yield naturally fit ETF wrappers.

• Institutions now have regulatory green lights.

• BlackRock’s participation will pour fuel on the fire.

If Bitcoin ETFs opened the door to crypto exposure…

Staking ETFs open the door to crypto income.

Within two years, staking ETF assets could easily reach:

$25–40 billion

…depending on market conditions, ETH price movements, and yield attractiveness.

Some analysts believe staking ETFs could eventually become:

• A standard retirement portfolio component

• A competitor to corporate bond ETFs

• A gateway drug to broader crypto adoption

The industry is early—but accelerating.

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Final Takeaway: The Floodgates Haven’t Fully Opened… Yet

BlackRock entering staking ETFs is more than a product launch.

It’s a turning point.

It signals:

• ETH = a yield-bearing institutional asset

• Staking = a mainstream financial primitive

• Crypto ETFs = about to evolve into income-generating machines

As The Defiant put it:

“A staked Ethereum ETF would mark BlackRock’s first crypto product to offer yield — a green light for the next phase of ETF innovation.”

The next 18–24 months will determine just how large this segment becomes.

But one thing is certain:

Staking ETFs are not a niche—they’re the future of how institutions will hold and earn from crypto.