Morgan Stanley Put Ethereum Yield in an ETP. Who Carries the Risk?
An investor can sell a share in Morgan Stanley's new Ethereum Trust during market hours. The trust may need weeks, or months during a stressed queue, to free some of the Ether (ETH) behind it.
Why such a large timing gap? The crypto exchange-traded product, or ETP, holds ETH behind shares that trade on NYSE Arca. Under normal market conditions, 50% to 80% of that ETH is expected to sit in Ethereum's validator system, earning rewards while exposed to protocol penalties and withdrawal delays.
Morgan Stanley launched the trust, ticker MSSE, on July 28 alongside a Solana product. Its annual sponsor fee is 0.14%. Figment, Galaxy Blockchain Infrastructure and Coinbase Canada operate as staking providers. The custodians and staking providers are expected to receive 5% of gross staking rewards, leaving 95% in the trust.
The wrapper makes the investment easier to buy and hold. It also converts validator performance, key security and Ethereum's withdrawal mechanics into fund-level financial risks. The useful question is therefore wider than the quoted APR. Which balance sheet stands between a protocol loss and the shareholder?
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