Ethereum ETFs Go Cash-Paying: How Grayscale's First 'Dividend' Sparks a Yield War

Grayscale's Ethereum Staking ETF (ETHE) distributed its first cash payout of $0.083 per share ($9.39M total) on Jan. 6, marking the first U.S. Ethereum ETP to deliver staking rewards to shareholders.

The distribution covered rewards from Oct. 6, 2023 to Dec. 31, 2023, with a record date of Jan. 5. This move aligns with IRS Rev. Proc. 2025-31, which established a tax-compliant framework for staking in trust-like products, ensuring rewards are treated as ordinary income rather than capital gains.

21Shares has mirrored this strategy, signaling industry-wide adoption of staking-based distributions.

The mechanics involve ex-distribution trading periods and defined schedules, with total returns now split between cash payouts and net asset value (NAV) growth.

This shift intensifies competition among ETF issuers, who now prioritize net yield, transparency, and distribution frequency to attract investors.

Grayscale's approach contrasts with traditional dividend models by tethering payouts directly to blockchain staking rewards.

However, the IRS guidance introduces complexities: while Rev. Proc. 2025-31 clarifies tax treatment, it also mandates precise record-keeping for issuers to avoid compliance risks.

This framework may pressure smaller players to adopt similar structures to remain competitive.

Look, the emergence of cash-paying Ethereum ETFs isn’t just a technical upgrade—it’s a structural shift.

By converting staking rewards into tangible distributions, these funds are bridging the gap between crypto’s yield potential and traditional finance’s dividend expectations. But the real test will be sustaining these payouts while navigating regulatory scrutiny and market volatility.

⚠️ LEGAL DISCLAIMER: This article is for informational purposes only and does not constitute financial or investment advice.