The Securities and Exchange Commission (SEC) Crypto Task Force met with industry representatives on February 5th to investigate the potential penetration of Crypto Exchange-Traded products (ETPS).
Jito Labs CEO Lucas Bruder and Chief Justice Rebecca Rettig attended the meeting along with multicoin capital managing partners Kyle Samani and Geaner Cunsel Cunsel Greg Xethalis.
According to SEC filings, companies claimed that staking was inherent to Proof of Proof (POS) blockchain networks such as Ethereum (ETH) and Solana (SOL).
Staking allows network voters to lock native assets such as ETH and SOL to participate in network consensus mechanisms. As a reward, they earn trading fees and newly minted tokens.
According to industry representatives, excluding staking from ETPS will allow investors to realize the full benefits of POS-based assets, reduce potential returns and prevent weakening of network security.
Overcoming SEC concerns
The SEC previously unveiled concerns about ETP staking, including redemption timelines that could disrupt the standard T+1 payment cycle, tax treatment of rating compensation, and treatment as a service as a security offer. It has been announced in.
These concerns have led the SEC to take a cautious attitude towards allowing staking of ETP structures. Early Ethereum ETP applications included staking features, but the publisher had to remove them as requested by the SEC.
To reduce the fear of the SEC, industry players presented two models during the meeting.
The first is called the “service model.” This allows some of the ETP Helt assets to bet through a third-party service provider running the Variator node. This method potentially leaves assets piled up, allowing timely redemptions through a management ratio system where only a small fraction of the holdings are actively wagered. .
The second method is the “liquid staking token model.” This includes ETPs that hold liquid stake tokens (LSTs) representing the stained assets. For example, Solana-based ETPs include Jitosol, a liquid staking derivative of Sol.
This second model streamlines staking within the ETP framework by reducing concerns about timing of redemption and avoiding direct involvement in the staking process.
Industry representatives assured the SEC that both proposed models could effectively address these concerns. The service model allows for controlled staking exposures, ensuring reimbursement is met without delay, and the LST model completely removes the direct impact on the staking reimbursement cycle.
Stance shift
Despite the SEC's historical concerns regarding the inclusion of Crypto ETPS, recent developments suggest that regulators may be open to rethinking their stance.
One important development is internal regulatory changes, including the appointment of pro-cryptocommissioner Mark Ueda as SEC's representative chair.
The regulator then formed a cryptographic task force led by pro-cryptocommissioner Hester Peirce. The task force aims to help create a regulatory framework for cryptographic frameworks. Perth had It was previously implied It includes staking Ethereum Exchange Funds (ETFs) in 2025 with a new pro-crypto SEC-led change that is being made “early” in 2025.
Meanwhile, institutional interest in crypto-based financial products is growing, and tools for these investors are being studied. One example is to include options in a Spot Bitcoin (BTC) ETF. The SEC has not yet taken a decisive stance, but the discussion shows possible changes in the regulatory perspective.
Bloomberg ETF Analyst James Safert I said That's what these debates should have happened “a few years ago,” but regulatory interest in this issue is a good start.
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