Source Says its ‘Very, Very Interested’

Evidence is mounting that the US Securities and Exchange Commission (SEC) is inching closer toward allowing staking rewards through crypto-based exchange traded products (ETPs). 

Eleanor Terrett, the lead crypto reporter for Fox Business, posted to X / Twitter yesterday claiming to have spoken to an unnamed source close to the SEC who said the agency is “very, very interested” interested in the benefits of staking.

This follows the release of a memo regarding the SEC Crypto Taskforce’s February 5 meeting with Jito Labs and Multicoin Capital that centred primarily around staking options for crypto-based ETPs.

And we might not need to wait long to see the first ETP with staking. The SEC yesterday acknowledged receipt of CBOE’s 19b-4 filing requesting approval to list the 21Shares Ethereum Core Exchange Traded Fund (ETF). If approved, this would mark the first listing of a US ETF allowing staking rewards.

So far, crypto ETPs have not been allowed to accrue staking rewards meaning that investors purchasing these products have been missing out on potential profits (compared to what’s possible when buying crypto directly) and the networks have been missing out on the security benefits of having staking.

Related: ETF Countdown: SEC to Decide on Multiple Solana Fund Filings by October

How Might ETF Staking Rewards Work?

Terrett’s X / Twitter post suggests the SEC is keen to allow crypto ETFs to accrue staking rewards, but it’s yet to be determined how exactly the staking would work. Terrett said the regulator has asked “industry for a memo detailing the different types of staking and their benefits.”

According to the SEC’s Crypto Taskforce memo, how to implement staking in ETP’s also formed the basis of the regulator’s meeting earlier this month with Jito Labs and Multicoin Capital, with the meeting’s two main topics being listed as:

• (i) the ability to include staking as a feature in exchange traded products (“ETPs”) and 
• (ii) potential models for staking in certain cryptoasset ETPs.

The memo also shows that two models of ETP staking were presented at the meeting — the services model and the liquid staking model. 

• The services model would see staking providers, such as Jito Labs, contracted to stake the fund’s assets (e.g., ETH or SOL) on behalf of the ETF issuers — with the issues left to figure out how redemptions would work.
• The liquid staking model would see the ETFs have a liquid staking token instead of holding the native assets directly (they wouldn’t hold ETH, for example, but an ETH liquid staking token). This model would simplify redemptions and would apparently streamline regulatory approvals.

Regardless of the model used to implement the staking in ETPs, it appears the SEC’s Crypto Taskforce is very much on board with the basic idea, stating:

SEC Acknowledgment Of Ethereum ETF With Staking Exciting Milestone

ETF guru and founder of the investment advisory firm The ETF Store, Nate Geraci, posted on X / Twitter highlighting the news that the SEC had acknowledged receipt of CBOE’s application to allow it to trade 21Shares Ethereum Core ETF with staking rewards.

This filing will likely be the first real test of the regulator’s stance on crypto ETFs featuring staking and no doubt its progress will be closely watched.

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News of the SEC’s acknowledgement triggered a wave of excitement, particularly for long suffering ETH maxis, who’ve largely missed out on the gains Bitcoin and many other cryptocurrencies have seen over the past 6 to 12 months: