BlackRock Seeks SEC Guidance on Crypto ETPs, Staking, Tokenization

BlackRock, the world's largest asset manager, held a meeting with the US Securities and Exchange Commission’s (SEC) Crypto Task Force on May 9 to discuss a variety of regulatory issues related to cryptocurrencies. The meeting focused on tokenization, staking, and the approval frameworks for exchange-traded products (ETPs).

During the meeting, BlackRock presented its digital asset offerings, including the iShares Bitcoin Trust (IBIT), the proposed iShares Ethereum Trust (ETHA), and the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). The firm sought input on how these products, as well as future offerings, might be regulated under federal securities laws as the digital asset market continues to evolve.

The discussion involved senior representatives from various departments within BlackRock, including regulatory affairs, legal, digital assets, and ETF markets. This meeting followed a previous session held on April 1, indicating BlackRock's ongoing engagement with the SEC on crypto policy matters.

In the previous meeting, BlackRock had discussed the technical aspects of in-kind redemptions for crypto ETPs and provided a detailed document outlining existing workflows under the current cash model. The firm also explored how these systems could be adapted to support alternative models for crypto-based funds.

One of the key topics discussed was the incorporation of staking features into ETPs. Staking has been a focal point in recent industry proposals reviewed by the SEC, as it involves determining whether proof-of-stake asset exposure within ETPs can meet regulatory expectations without compromising liquidity or investor protections.

Tokenization, the process of representing traditional assets as digital tokens on the blockchain, was another significant area of discussion. BlackRock sought feedback on how tokenization efforts could be structured within the existing securities framework. The firm also proposed interim standards for crypto ETP issuers, suggesting that the SEC consider providing codified guidance ahead of broader rulemaking.

BlackRock also discussed criteria under Section 6(b) of the Exchange Act that could be used to evaluate whether a crypto ETP satisfies regulatory thresholds for exchange listing. These criteria include assessments of market integrity and investor safeguards.

Additionally, the meeting covered options on crypto ETPs, with BlackRock raising technical questions about position and exercise limits. The firm requested clarity on how such limits could be structured in relation to liquidity thresholds for the underlying crypto or ETP shares.

Overall, the meeting highlighted BlackRock's proactive approach to engaging with regulators to navigate the complex landscape of crypto regulations. The firm's efforts to seek guidance on various aspects of digital asset offerings demonstrate its commitment to ensuring compliance and investor protection as it expands into the crypto market.