Bitwise Prepares First Avalanche ETF with Staking in the US

Bitwise submitted an update to its SEC filing to launch an ETF based on Avalanche. The amendment proposes that the fund be allowed to stake part of its AVAX holdings, which would make it the first regulated product in the United States to offer exposure to a crypto asset together with yield derived from block validation on a blockchain network.

A proposal that integrates AVAX, regulation and staking

The ETF would trade under the ticker BAVA and would carry an annual fee of 0.34%, one of the lowest among proposed funds linked to Avalanche. The update states the fund could allocate up to 70% of its AVAX holdings to staking, keeping the remainder as liquidity.

Bitwise also added a temporary incentive: the first USD 500 million in assets under management would be exempt from the management fee for the first month. With this structure, the ETF would combine exposure to AVAX’s price with potential income from validating transactions on the network.

How staking would work within the ETF

Avalanche operates under a proof-of-stake system, in which nodes that lock tokens participate in transaction validation. Bitwise proposes to move this process into a regulated environment where the fund centrally manages staking so that individual investors do not need to run their own nodes.

Rewards generated from staking would be distributed among shareholders after a prior deduction of 12% intended to cover operational costs. Asset custody would be handled by Coinbase Custody Trust Company, a regulated entity widely used for financial products based on crypto assets.

Differences compared with other Avalanche ETFs

The race to launch an AVAX ETF includes proposals from issuers such as VanEck and Grayscale. Those funds carry fees between 0.40% and 0.50% and do not include staking functions, limiting them to tracking the asset’s price.

By enabling additional yield, BAVA introduces a differentiating element within the market for regulated crypto products.

Regulatory adjustments and disclosures included

The update submitted to the SEC includes clarifications on technical risks, operational vulnerabilities, custody incidents and emerging scenarios such as advances in quantum computing. The document also details liquidity reserves, validation mechanisms and internal risk-management processes.

In addition, recent guidance from the IRS clarified the tax treatment of staking rewards, allowing products like BAVA to operate without unexpected tax penalties. Nonetheless, the entire scheme depends on final approval from the SEC.

Potential implications for investors

If approved, BAVA would offer simplified access to the Avalanche ecosystem, enabling traditional investors to gain exposure to AVAX and simultaneously receive rewards from staking without the need to run technical infrastructure.

The combination of low fees and additional features could influence the development of future financial products based on digital assets. Its approval could set a precedent for subsequent funds built on proof-of-stake networks within the traditional financial market.