Task Force Investigates Innovative Staking Solutions for ETPs in the Crypto Space
SEC meets with Jito Labs, Multicoin Capital to discuss staking in ETPs.
Liquid staking tokens and partial staking models proposed for ETFs.
Blockchain Association calls for clearer rules and a pro-innovation approach.
The SEC’s recent meetings with leading crypto firms signal a turning point for the industry. The staking in exchange-traded products (ETPs) has become a hot topic for regulatory reform and future growth in the sector.
SEC Considers Staking Models for ETPs
The U.S Securities and Exchange Commission’s (SEC) Crypto Task Force met with major industry players in February to address regulatory challenges in the cryptocurrency sector. The discussions focused on the inclusion of staking in exchange-traded products (ETPs), guidelines for crypto asset classification, and regulatory policies for digital assets.
On February 5, the SEC hosted representatives from Jito Labs and Multicoin Capital to discuss the inclusion of staking in crypto ETPs. The companies presented two models for staking into ETPs to enhance liquidity and compliance with SEC rules. The first model proposed staking a portion of assets through third-party validators. The second model suggested using liquid staking tokens (LSTs)to hold staked versions of assets, like Solana’s JitoSOL.
Crypto ETPs Discussion
The SEC has previously expressed concerns about staking in ETPs. The commission required issuers to remove staking features from Ethereum ETFs before approval, citing concerns about liquidity, tax implications, and classification of staking transactions.The proposed models aim to address these issues by offering solutions such as partial staking and LSTs, which are more flexible and aligned with redemption rules.
Jito and Multicoin also raised the possibility of using liquid staking tokens, which could offer a solution to the liquidity issue. LSTs are tradable and are more compatible with the SEC’s redemption rules. The SEC acknowledged the potential of LSTs but expressed concerns about how they should be classified under securities laws and their tax treatment. However, Jito Labs and Multicoin Capital argued that staking should not be treated as a securities transaction.
In addition to staking, the Blockchain Association called on the SEC to adopt a pro-innovation approach and provide clearer guidelines for crypto products. They emphasized the need for uniform standards for broker-dealers, custodians, and exchanges. The association also urged the SEC to review and correct problematic interpretations of laws made by the previous administration.
Pierce to Clean “Mess” in Crypto Regulation
The SEC’s Crypto Task Force, led by Commissioner Hester Peirce, is also reviewing previous interpretations of securities laws that could impact the digital asset industry. Peirce has called for a “retroactive” review of decisions made during the tenure of former SEC Chair Gary Gensler. This review aims to correct erroneous legal interpretations and provide clarity for industry participants.
Further discussions are expected to continue as industry participants seek clarity on regulatory frameworks and the future of crypto financial products. The SEC’s stance on staking in ETPs remains uncertain, but the proposals presented could pave the way for more flexibility in the market. The outcome of these discussions could have significant regulatory implications for crypto products.
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