On April 1, the US Securities and Exchange Commission’s (SEC) Crypto Task Force convened distinct meetings with representatives from BlackRock and the Crypto Council for Innovation’s (CCI) Proof of Stake Alliance. The focus was on discussing regulatory matters surrounding crypto exchange-traded products (ETPs).
Meeting notes reveal that BlackRock addressed in-kind redemptions for crypto ETPs in the US, while the CCI brought up topics related to staking on ETPs in its conversation with the regulator.
### Changes to Crypto ETPs
Senior representatives from regulatory affairs, product engineering, ETF capital markets, and federal policy were part of BlackRock’s delegation.
During their session with the Crypto Task Force, BlackRock shared a document outlining current workflows and the roles of market participants that support the cash model associated with ETPs. The firm also explored how these systems could potentially adapt to in-kind models for future crypto-based funds.
In a separate meeting, the SEC engaged with members of the Proof of Stake Alliance, which is part of the Crypto Council for Innovation.
This group, which included representatives from various firms such as a16z, Paradigm, Consensys, Alluvial, Lido Labs Foundation, and Marinade, discussed staking-related topics and their relevance to crypto ETPs.
The agenda involved examining different staking models, including liquid, custodial, and delegated non-custodial options. Participants also presented principles for staking-as-a-service that aim to guide the regulatory framework for validator operations and user involvement in proof-of-stake networks.
Additionally, the discussion highlighted how aspects like staking rewards, validator responsibilities, and relationships with service providers impact the risk profile and valuation of potential staking-enabled crypto ETPs.
### Staking on Crypto ETP Offerings
The SEC’s discussions with BlackRock and the Proof of Stake Alliance underscore a sustained institutional interest in seeking regulatory clarity for crypto financial products.
These conversations follow a previous meeting on February 5, during which the SEC’s Crypto Task Force met with representatives from Jito Labs and Multicoin Capital to explore the potential integration of staking within crypto ETPs.
Participants, including Jito Labs CEO Lucas Bruder and Multicoin Capital managing partner Kyle Samani, advocated that staking is crucial to the functionality of proof-of-stake (PoS) blockchains like Ethereum and Solana.
They observed that not including staking in ETPs could lead to reduced investor returns and undermine the practical use of PoS assets. Representatives from Jito Labs and Multicoin Capital suggested two models to address the SEC’s concerns: the “Services Model,” which permits partial staking through third-party validators while ensuring liquidity for redemptions, and the “Liquid Staking Token Model,” which allows ETPs to hold liquid staking tokens.
While no regulatory outcomes were made public, these meetings are part of the SEC’s ongoing evaluation of the technical and legal frameworks related to crypto ETPs.