Coming Upcoming: SEC Holds High-Level Meeting for Feature That Could Ignite the Cryptocurrency Market!

According to meeting notes published by the regulatory authority, the US Securities and Exchange Commission's (SEC) Crypto Task Force recently held discussions with Jito Labs and Multicoin Capital to explore the feasibility of incorporating crypto products traded on the exchange into (ETPs) staking.

The meeting, held approximately two weeks after the establishment of the task force, indicates that the SEC continues to review various proposals for Solana (SOL) ETFs in the midst of an increase in applications from asset managers looking to list alternative crypto-based investment products. Leading asset manager VanEck was the first company to apply for a SOL ETF last year, aiming to take advantage of potential regulatory changes that could be favorable to the sector, especially if former President Donald Trump wins the upcoming elections.

According to the notes, the discussions went beyond theoretical frameworks and focused on practical staking models that could be integrated into ETFs. Among the participants were Multicoin Capital Managing Partner Kyle Samani, General Counsel Greg Xethalis, Jito Labs CEO Lucas Bruder, Chief Legal Officer Rebecca Rettig, as well as SEC representatives.

The potential benefits of staking in crypto ETPs were discussed in the meeting notes. The document stated, “Restricting staking in crypto asset ETPs reduces the efficiency of the underlying asset and deprives investors of potential returns, harming both investors and a significant portion of the circulating supply of an asset from being staked, thus undermining network security.”

Staking is a process that involves the use of validators to secure a proof-of-stake blockchain network by locking assets, which also generates rewards. It is reported that the SEC's task force is evaluating two possible approaches: allowing a portion of assets under management of an ETP to be staked through validator service providers or issuing a liquid staking token for each asset staked to facilitate redemption options.

Despite the potential benefits, the SEC has historically been cautious about approving the staking of ETFs due to concerns about asset lockup periods potentially delaying investor redemptions, tax implications, and whether staking as a service constitutes a securities transaction.