SEC Explores Staking Integration in ETPs

The U.S. Securities and Exchange Commission (SEC) has been exploring the integration of node staking and liquidity mining functionalities into Exchange-Traded Products (ETPs). According to a leaked SEC meeting memo, the Crypto Special Action Working Group staff met with representatives from Jito Labs and Multicoin Capital Management to discuss the feasibility of incorporating staking functionality into ETPs and a staking model scheme for specific crypto asset ETPs.

Incorporating staking functionality into ETPs could benefit investors by more accurately reflecting the underlying network asset's value and allowing the issuer to support the security of the asset's native network. There are at least two feasible paths for the staking model:

1. Allowing a portion of the assets in the ETP to be staked through validation node service providers while ensuring timely redemption;

2. Introducing Liquidity Staking Tokens (LST) to enable staking of all native assets.

This development signals a potential shift in the way ETPs interact with the underlying blockchain networks, potentially enhancing the value and security of these products for investors. As the SEC continues to explore these possibilities, the crypto industry awaits further guidance and clarification on the regulatory landscape for staking and liquidity mining functionalities in ETPs.