SEC Explores Staking in Crypto ETPs
SEC Explores Staking in Crypto ETPs
The SEC’s Crypto Task Force recently engaged with Jito Labs and Multicoin Capital to explore incorporating staking functionalities into cryptocurrency exchange-traded products (ETPs). This follows previous attempts to launch staked ETPs, which encountered regulatory hurdles. A February 5th meeting, detailed in a recently released SEC memo, focused on addressing these challenges.
Key Discussion Points:
- Staking Models: Jito Labs and Multicoin presented two proposed models: the Services Model (using validator service providers) and the LST Model (utilizing liquid staking tokens).
- Addressing Past Concerns: The meeting directly addressed previous concerns that led to the removal of staking from prior ETP applications. These issues included redemption timing, tax implications for grantor trusts, and the classification of staking services as securities transactions.
- Benefits of Staking in ETPs: The firms argued that allowing staking enhances investor returns through staking rewards and strengthens network security by increasing the staked portion of the asset's circulating supply.
This initiative holds significant implications for the crypto ETP market. The CBOE BZX Exchange recently submitted a Form 19b-4 to the SEC, proposing to enable staking within the 21Shares Core Ethereum ETF. This is a noteworthy development, following the SEC's approval of spot Ethereum ETFs in 2024. Previous attempts by 21Shares and ARK Invest to launch staked Ethereum ETFs ultimately dropped the staking feature due to regulatory uncertainty.
The SEC’s continued engagement with industry leaders, including the Blockchain Association and Nasdaq, underscores its commitment to navigating the complexities of crypto asset regulation. This proactive approach is vital for fostering innovation and investor protection in the evolving cryptocurrency landscape.
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