BlackRock,SEC Discuss Crypto ETPs,Staking,Tokenization

Executives from BlackRock, a prominent American investment firm, engaged in a meeting with the US Securities and Exchange Commission (SEC) on Friday. The discussion focused on various aspects of cryptocurrency spot exchange-traded products (ETPs), highlighting the growing interest in the crypto industry within the United States.

The meeting, which was part of the SEC’s crypto task force led by Commissioner Hester Pierce, addressed several regulatory issues related to crypto assets. One of the key topics discussed was staking in exchange-traded funds (ETFs). BlackRock sought to understand the Commission’s perspective on staking and the potential for permitting ETFs with staking options. This comes at a time when the New York Stock Exchange (NYSE) has filed for a proposed rule change to introduce staking in the Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ETF. If approved, this would allow Grayscale to lock up portions of the crypto assets in its ETF holdings to generate additional income for the Trust. The SEC delayed a decision on this request in April, with analysts predicting that the Commission might hold off on approval until the final deadline in October.

In addition to staking, the conversation between BlackRock and the SEC covered the tokenization of securities in line with existing federal securities laws. BlackRock offers the BUIDL token, a tokenized money market fund that invests in high-quality government securities such as treasury bills. The discussion also touched on the need for clear standards to determine the approval or rejection of a crypto ETP, ensuring that ETP trading only occurs on regulated exchanges as per Section 6 of the Exchange Act. BlackRock proposed the creation of a temporary regulatory system for ETP issuer activity while this framework is being developed.

The final topic of discussion explored the requirements for setting positions and exercise limits on crypto ETPs trading options, with a focus on how the liquidity of the underlying assets influences these limits. This comprehensive dialogue underscores the ongoing efforts to integrate cryptocurrency into traditional financial markets, with both BlackRock and the SEC working towards establishing a regulatory framework that balances innovation with investor protection.