🌎 SEC Shifts Stance on Crypto Staking in ETFs

Crypto Staking in ETFs: The SEC’s Shift in Stance

The U.S. Securities and Exchange Commission (SEC) has reassessed its stance on crypto staking in exchange-traded funds (ETFs), signaling a willingness to include the feature. This development comes after talks between Jito Labs, Multicoin Capital, and the SEC’s Crypto Task Force.

Crypto staking involves depositing digital assets into a smart contract to secure blockchain networks. In return, stakers receive a yield as a reward, incentivizing participation. The introduction of liquid staking and liquid restaking protocols has also attracted more users to the space.

Previous Restrictions on Staking

Under previous administrations and former SEC chair Gary Gensler, staking was effectively restricted and considered a violation of federal regulations. Companies like Kraken were forced to shut down staking services for U.S. customers, although the company has since relaunched the feature amid shifting regulatory policies.

A Change in Stance

The SEC’s stance appears to have changed following the inauguration of President Donald Trump. A task force established by interim chair Mark Uyeda, led by anti-regulation-by-enforcement commissioner Hester Peirce, has committed to clarifying crypto regulations and addressing industry concerns.

The initiative acknowledged that some issuers originally included staking in Ethereum ETF applications but were instructed to remove such language before their filings were considered. The SEC’s Crypto Task Force is now prepared to reevaluate staking in ETPs.

Potential Benefits of Staking in ETFs

According to the SEC’s Crypto Task Force, staking could benefit investment products and the broader digital asset ecosystem. Jito Labs and Multicoin Capital emphasized this point, stating:

Given the critical role of staking in blockchain networks, we believe staking would be a net benefit to these ETPs products and the overall crypto industry. Allowing staking of native cryptocurrencies would enhance the safety and security of the networks in which these assets operate, and would align investors with the unique features of these assets.

Potential Implications

Revisiting staking in ETFs could reignite a debate from 2024, when spot Ether ETFs were still under review. Analysts have raised concerns that Ethereum ETFs with staking may concentrate locked Ether supply in the hands of a few. However, experts also believe that the products would drive Ether demand and investor appetite for staking protocols.