The SEC's Shift to Rule-Based Crypto Regulation: A Catalyst for Institutional Onboarding

The U.S. Securities and Exchange Commission’s (SEC) 2025 regulatory overhauls have marked a pivotal turning point for institutional investors seeking exposure to crypto-native and blockchain-enabled assets. By shifting from an enforcement-driven approach to a structured, rule-based framework, the SEC has not only clarified ambiguities but also unlocked new avenues for capital deployment. This analysis explores how these regulatory developments—particularly the approval of in-kind creation/redemption mechanisms for crypto ETPs, the de-securitization of liquid staking, and the harmonization of crypto regulations with the CFTC—create actionable entry points for investors.

1. In-Kind ETPs: A Cost-Efficient On-Ramp for Institutional Capital

The SEC’s July 2025 approval of in-kind creation and redemption mechanisms for institutional crypto exchange-traded products (ETPs) has fundamentally altered the landscape for large-scale investors. Previously, ETPs relied on cash-based models, which introduced inefficiencies such as slippage and higher tax liabilities. Now, authorized participants can exchange actual crypto assets (e.g., Bitcoin or Ethereum) for ETP shares, reducing trading costs and improving liquidity [2].

This shift aligns crypto ETPs with traditional commodity-based ETFs, enabling institutions to gain exposure to digital assets with the same operational efficiency as gold or oil. For example, BlackRock’s proposed Bitcoin ETP, which now incorporates in-kind mechanisms, is projected to attract over $10 billion in assets under management within its first year [5]. Investors should prioritize ETPs with low tracking errors and transparent custody solutions, as these will become the primary vehicles for institutional onboarding in 2025.

2. Liquid Staking Derivatives: Yield Generation Without Regulatory Overhead

The SEC’s August 2025 clarification that liquid staking tokens (e.g., stETH, mSOL) are not securities has removed a critical barrier to institutional participation. By affirming that these tokens represent proof of ownership rather than investment contracts, the agency has enabled firms to deploy capital in yield-bearing strategies without navigating securities registration requirements [4].

Total value locked (TVL) in liquid staking protocols has surged to $81.08 billion, with Ethereum accounting for 75% of the market [1]. Protocols like Lido and Rocket Pool now offer institutional-grade staking solutions, while Solana’s ecosystem is expanding rapidly, with a 217% year-on-year growth in TVL [1]. Investors should consider allocating to staking-focused ETFs or direct staking pools, particularly in Ethereum and Solana, where infrastructure maturity and regulatory clarity are strongest.

3. Harmonized Regulations and the Rise of “Super Apps”

The SEC’s collaboration with the CFTC to streamline crypto regulations has created a more cohesive framework for market participants. A joint staff statement in September 2025 confirmed that regulated exchanges can facilitate spot crypto trading, eliminating prior ambiguities about jurisdictional overlaps [4]. This alignment is accelerating the development of “super apps”—platforms that integrate both traditional and tokenized securities—by reducing compliance friction [6].

For instance, Fidelity and Charles Schwab are now piloting hybrid platforms that allow clients to trade crypto alongside equities, leveraging the SEC’s updated custody rules [6]. Investors should monitor these platforms for early access to tokenized real-world assets (RWAs) and blockchain-native derivatives, which are expected to become mainstream in 2026.

4. Project Crypto and the Long-Term Infrastructure Play

The SEC’s broader Project Crypto initiative, led by Commissioner Hester Peirce, is modernizing securities rules to accommodate blockchain innovations. This includes proposals to streamline custody regulations and expand trading venue options [3]. These changes are not only attracting institutional capital but also fostering a regulatory environment where U.S. firms can lead global innovation [2].

Investors should consider long-term infrastructure plays, such as blockchain-based settlement systems or tokenization platforms, which stand to benefit from the SEC’s proactive stance. For example, companies like Coinbase and Bakkt are already positioning themselves as key infrastructure providers for institutional-grade crypto trading [6].

Conclusion

The SEC’s 2025 regulatory shifts have transformed crypto from a speculative asset class into a structured, institutional-friendly market. By prioritizing in-kind ETPs, liquid staking strategies, and blockchain infrastructure, investors can capitalize on the growing convergence between traditional finance and digital assets. As the U.S. aims to solidify its leadership in digital finance under President Trump’s vision, the next 12–18 months will likely see a surge in institutional capital flows into crypto-native and blockchain-enabled assets.

Source:
[1] Liquid Staking Gets Its Big Break: SEC Clarity & ... [https://www.linkedin.com/pulse/liquid-staking-gets-its-big-break-sec-clarity-institutional-oykxc]
[2] The SEC states that liquid staking is not considered a ... [https://www.chaincatcher.com/en/article/2195577]
[3] SEC says liquid staking does not constitute securities offering [https://www.fxstreet.com/cryptocurrencies/news/sec-says-liquid-staking-does-not-constitute-securities-offering-202508060021]
[4] SEC and CFTC staff clear path for spot crypto trading on [https://www.aoshearman.com/en/insights/ao-shearman-on-fintech-and-digital-assets/sec-and-cftc-staff-clear-path-for-spot-crypto-trading-on-regulated-exchanges]
[5] The U.S. SEC has approved physical creation and ... [https://www.gate.com/learn/articles/the-us-sec-approved-the-physical-subscription-and-redemption-of-crypto-etps-which-brought-another-positive-news-to-crypto-finance/11475]
[6] SEC and CFTC Launch Crypto Initiatives to Revamp [https://www.fintechanddigitalassets.com/2025/08/sec-and-cftc-launch-crypto-initiatives-to-revamp-regulations-and-promote-innovation/]