3iQ, Canada’s first Bitcoin (BTC) fund issuer, revealed that its Ethereum-based (ETH) exchange-traded funds (ETF), The Ether Fund and the 3iQ Ether Fund, will begin staking their ETH holdings for rewards, according to an Oct. 19 statement.
3iQ explained that its move towards staking was designed to provide its investors with “additional yield generated by dedicated validators on the Ethereum network’s Proof of Stake (PoS) consensus mechanism while eliminating the complexities of directly handling digital assets.”
“The Funds will earn rewards in the form of ETH, which will be reflected in the net asset value (NAV) of the Funds through accretive yield,” the firm said.
Data from 3iQ’s website shows that the two funds have a combined net asset value of around $130 million.
To incentivize investors, 3iQ said it would waive the management fee of the 3iQ Ether ETF until March 31, 2024, and the fund would be renamed “3iQ Ether Staking ETF” from Oct. 20.
Meanwhile, 3iQ said it will “exclusively use” Coinbase Custody’s institutional staking infrastructure. Per the statement, its ETH is held custodied with Coinbase Custody, with oversight provided by Tetra Trust.
The asset manager did not specify how much of its portfolio would be staked. However, it stated that it would “adopt a measured approach to the Staking Activities, taking into account the liquidity needs of the Fund and the novelty of the investment strategy.”
3iQ further revealed that it would charge 25% of the staked rewards generated by the Funds as Staking Service Fee. The firm clarified that this fee would only be deducted from rewards generated by the Staking Activities.
Staking is an integral part of the Ethereum blockchain network that involves committing at least 32 ETH to support the network for a set period to earn rewards. Ethereum’s website describes the process as “a public good” that “keeps Ethereum secure for everyone.” According to the website, ETH stakers will earn 3.5% rewards annually.
Data from Beaconscan shows that the total number of staked ETH has grown to 27.8 million during the last six months despite the introduction of the Shanghai update, which allowed withdrawals from the beacon chain.
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