SEC makes it clear that Proof-of-Stake isn't equivalent to 'security' - Paving the way for spot ETH ETF staking?
SEC Clarification Bolsters Prospects for U.S. Spot ETH ETF Staking
The U.S. Securities and Exchange Commission (SEC) has issued a clarification that some staking activities, including those on proof-of-stake (PoS) blockchains like Ethereum [ETH], Solana [SOL], and Cardano, are not considered security transactions.
Commissioner Hester Peirce welcomed the directive, stating it provides much-needed clarity for stakers and providers of 'staking-as-a-service' in the United States. The Division's statement applies to persons who self-stake certain covered crypto assets on a proof-of-stake or delegated proof-of-stake network.
Rebecca Rettig, Jito Labs' legal officer, stated that this move is potentially beneficial for other forms of non-custodial staking activities, including liquid staking. This development, while not yet guaranteeing the approval, has removed a significant hurdle in the path of potential U.S. spot ETH ETF staking.
According to analyst Nate Geraci, the sole remaining obstacle is a clarification from the Internal Revenue Service (IRS) regarding how staking revenue will be handled within the structure used for spot ETH ETFs.
During Q2, ETH staking saw renewed interest, growing from 33M ETH to over 34M ETH, with an average annualized return of 3%. Approval of ETH ETF staking would enable investors to enjoy staking rewards without the complexities of staking individual ETH or the associated risks.
However, the positive news failed to boost Ethereum's (ETH) price, with the altcoin's spot market demand declining further. The Open Interest (OI) remains elevated, indicating high speculative interest and market leverage. If Ethereum's spot market demand does not improve, the high leverage could complicate the rally and heighten liquidation risks.
In a related development, Grayscale's Ethereum ETF staking proposal has been delayed until at least June 1, 2025. REXShares has filed for ETH and Solana staking ETFs, structured to comply with SEC guidelines, although the SEC has raised concerns about the improper filing of the registration forms. Analysts believe that 2025 could be a pivotal year for the approval of staking-based ETFs, given the current momentum.
- The clarification by the SEC could potentially extend to other cryptocurrencies like Bitcoin [BTC], Ethereum Classic [ETC], and others that operate on PoS blockchains, such as Cardano [ADA] and Solana [SOL], in terms of staking activities.
- Investors might find crypto exchanges like Coinbase, Binance, and Kraken more appealing, as they are actively involved in supporting the staking of various cryptocurrencies, including Ethereum [ETH] and Ethereum Classic [ETC].
- The technological advancements in DeFi (Decentralized Finance) space could possibly lead to the emergence of new cryptocurrencies that embrace staking, like Avalanche [AVAX], Tezos [XTZ], and Polkadot [DOT].
- Apart from ETH, there's growing interest in other PoS-based cryptocurrencies for staking, such as Bitcoin Cash [BCH] or Litecoin [LTC], which also offer staking rewards to their holders.
- With the rising popularity of staking, it's essential for financial institutions and banking sectors to keep up with this crypto technology, as it could revolutionize how we think about investing and saving, making it more passive and potentially profitable.
- Cryptocurrencies like ETH and Bitcoin [BTC], along with other altcoins, have shown promising growth potential in recent years, making them attractive investment opportunities for those looking to diversify their portfolios and stay connected with the fast-evolving world of crypto finance and technology.
