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Small-cap firms add ether to treasuries, drawn by staking

yields

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At least $3.5 billion worth of ether held by companies

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Ether seen as middle ground between bitcoin and riskier

tokens

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Regulatory gray areas, volatility still limit broader

adoption

By Niket Nishant and Manya Saini

Aug 5 (Reuters) -

Some companies are favoring ether over bitcoin as an

inflation hedge as the cryptocurrency hits a sweet spot between

affordability and credibility, while being underpinned by a

strong blockchain backbone.

Corporate treasuries held at least 966,304 ether tokens on

their balance sheets at the end of July, worth nearly $3.5

billion, according to a Reuters analysis of regulatory filings

and disclosures. That compares with just under 116,000 at the

end of 2024.

The second-largest cryptocurrency has become the token of

choice for those looking for more active returns. Unlike

bitcoin, which solely relies on price appreciation, ether can be

used in staking, a practice where holders lock up their tokens

to support the ethereum network in exchange for rewards.

Staking can offer yields of about 3% to 4%.

"Ether balances growth potential with the legitimacy of a

blue-chip asset. It is large enough to be institutional-grade,

yet early enough in adoption to benefit from future upside,"

said Sam Tabar, CEO of Bit Digital ( BTBT ), which has ether on

its balance sheet.

The cryptocurrency also powers the ethereum blockchain,

which supports a wide range of applications including lending

platforms, trading protocols and stablecoins, making it a core

component of the crypto financial system.

"Holding ether is more like owning oil, whereas bitcoin is

more one-dimensional, like gold. Ether is the foundation of

decentralized finance, not just a pure store of value," said

Anthony Georgiades, general partner at VC firm Innovating

Capital.

Still, challenges such as regulatory uncertainty and price

volatility, which affect the assets' fair value, continue to

hinder adoption.

CAUTION AMID HYPE

After disclosing plans to accumulate ether earlier this

year, shares of Peter Thiel-backed BitMine and gaming

media network GameSquare ( GAME ) jumped as much as 3,679% and

123%, respectively, underscoring how eager investors are to

chase crypto-linked momentum.

But analysts have cautioned against unfettered optimism.

"The share price response has the hallmarks of the meme

craze," said Dan Coatsworth, investment analyst at AJ Bell.

The inherent volatility of crypto tokens also makes it a

poor fit for boards with a low risk appetite, which could curb

ether's appeal beyond core industry players.

"Most CFOs would not swap liquid cash for ether. It remains

a niche tool best left to 'tech-forward' treasuries that can

tolerate swings and complexity," said Anuj Karnik, founder and

managing director at Straitsberg, a Singapore-based treasury

advisory firm.

"Treasury best-practice values liquidity, predictability and

regulatory certainty above all. Most corporate leaders view

crypto holdings today as experimental 'alternative' allocations,

not mainstream policy."

Also, while the Securities and Exchange Commission has

softened its stance on staking activities, the regulatory

framework around the practice is still evolving.

Key questions include whether rewards should be taxed as

income, how to treat locked tokens on balance sheets and whether

offering staking services could trigger custodial obligations.

"Every staking reward could be landing in a compliance gray

zone," said Michael Ashley Schulman, partner and chief

investment officer at Running Point Capital Advisors.

Still, despite the risks, some companies continue to double

down, raising capital through share sales or debt offerings to

fund their ether purchases.

BitMine sold a $182 million stake to Cathie Wood's ARK

Invest in July. GameSquare ( GAME ) CEO Justin Kenna also told Reuters

his company might sell stock to invest in ether.

"We're not in the business of being overly dilutive. But

we'll continue to be opportunistic," Kenna said.