The US SEC Sharpens Focus on Crypto Staking
The US Securities and Exchange Commission (SEC) is intensifying its scrutiny of crypto staking and is considering issuing new guidance on the practice, as reported by FOX Business journalist Eleanor Terrett. The SEC is showing a keen interest in staking and has requested industry input on the various types of staking and their benefits.
According to Terrett, the agency is “very, very interested” in staking and has reached out to industry players for a detailed memo on the subject.
Discussion on Staking in Crypto ETPs
Recently, the SEC’s Crypto Task Force held discussions with representatives from Jito Labs and Multicoin Capital Management regarding the incorporation of staking features into crypto exchange-traded products (ETPs).
The firms presented two models for implementing staking in crypto ETPs. The Services Model would allow ETPs to stake native assets through validator service providers while ensuring timely redemptions. On the other hand, the LST Model involves ETPs holding liquid staking tokens representing staked versions of native assets.
Addressing Previous Concerns
The meeting also addressed past concerns that led to the exclusion of staking features from earlier ETP applications. Issues such as redemption timing, tax implications for grantor trusts, and the classification of staking services as securities transactions were discussed.
The firms argued that the absence of staking in crypto ETPs could negatively impact investors by limiting the productivity of the underlying asset and potentially depriving them of returns. It could also affect network security by not allowing a significant portion of an asset’s circulating supply to be staked.
Proposed Staking Activities for Ethereum ETF
CBOE BZX Exchange has submitted a proposal to the SEC, seeking approval for staking activities in the 21Shares Core Ethereum ETF. If approved, this move could enhance the ETF’s returns from its Ethereum holdings, potentially benefiting investors.
This proposal marks the first of its kind following the SEC’s approval of spot Ethereum ETFs last year. The SEC acknowledged the filing on Wednesday.
Previous Attempts and Future Prospects
In the past, 21Shares and ARK Invest made efforts to launch a staked Ethereum ETF but later removed the staking feature from their application. Eventually, ARK Invest withdrew from the initiative, leaving 21Shares to proceed with the 21Shares Core Ethereum ETF.