SEC is ‘Very Interested’ in Crypto Staking, Requests Industry Insights Ahead of New Guidelines

The election of Donald Trump has increased anticipation for significant policy changes in the US digital asset sector. A recent tweet indicates that the SEC is taking a significant interest in crypto staking and may be on the verge of issuing new guidelines. However, before formalizing any staking policies, the SEC is currently seeking feedback from the industry.

SEC is ‘Very, Very Interested’ in Staking

According to FOX Business reporter Eleanor Terrett, the US SEC is increasingly focusing on crypto staking and might soon release new guidelines on the practice, based on information from a source who recently spoke with the securities regulator.

Interestingly, SEC has requested the industry to submit a detailed memorandum on the various types of staking and their advantages. The source anticipates that the SEC will provide some form of guidance on crypto staking shortly.

Previously, the SEC acknowledged a 19b-4 filing by the Cboe exchange, which sought approval for including staking features in the 21Shares Core Ethereum ETF (CETH). This might be seen as a positive change, as crypto ETFs were previously prohibited from engaging in staking activities under SEC Chair Gary Gensler’s tenure, citing violations of securities laws.

Last week, the SEC’s Crypto Task Force discussed adding staking to crypto exchange-traded products (ETPs) with Jito Labs and Multicoin Capital Management. They reviewed two staking models for ETPs: the Services Model, which uses validator services to allow asset staking with timely redemptions, and the LST Model, which uses liquid staking tokens to represent staked assets.

The meeting also revisited prior issues with staking in ETPs, such as redemption delays, tax consequences, and the legal status of staking services. The firms pointed that excluding staking reduces both the potential returns for investors and the overall security of the network by limiting asset staking.

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Will the SEC Approve ETH ETF Staking?

While the U.S. Commodity Futures Trading Commission (CFTC) classifies Ethereum as a commodity, the U.S. Securities and Exchange Commission (SEC) has not yet definitively classified ETH as either a security or a commodity. The SEC’s hesitations surfaced during last year’s review of the spot Ethereum ETF, particularly regarding the endorsement of its staking features.

The SEC’s primary concern involved the potential for crypto exchanges to manage and market staking as an “investment product,” promising specific returns. The agency was wary of this approach, citing ambiguities and a lack of adequate investor protections.

Many experts and analysts believe that Ethereum didn’t live up to expectations in 2024, struggling to leverage key developments that would usually propel another token forward. 

Despite the launch of Ethereum ETFs in both the U.S. and Hong Kong, the significant Dencun upgrade, and the market excitement generated by the so-called Trump Trade, Ethereum didn’t see the same market uplift as other tokens.

If staking rewards are enabled for ETH ETFs, optimism could trigger a significant bull run for Ethereum.