In a significant development for the cryptocurrency sector, nearly 30 advocacy groups, led by the Crypto Council for Innovation (CCI), have formally approached the U.S. Securities and Exchange Commission (SEC) to request clear regulatory guidance regarding crypto staking and staking services.
The CCI’s Proof of Stake Alliance (POSA) articulated its stance in an April 30 letter addressed to SEC Commissioner Hester Peirce, who is overseeing the agency’s Crypto Task Force. The letter emphasized that staking is a fundamentally technical process rather than an investment activity, underscoring its crucial role in the decentralized internet.
The collective argued that staking should not fall under the federal securities laws. They contend that it fails to meet the securities-defining Howey test, primarily because stakers maintain ownership of their assets throughout the process.
The letter was a response to the SEC’s request for public input on whether staking and liquid staking—where crypto users lock up tokens to earn additional rewards—should be regulated. Notably, the advocacy group called for support in incorporating staking features into exchange-traded products (ETPs), urging the SEC to refrain from imposing overly prescriptive rules that could stifle innovation in the staking environment.
The coalition also highlighted that blockchain protocols, not the actions of staking providers, determine rewards. This suggests that stakers are not relying on any managerial efforts akin to a traditional investment, where profits are generated through corporate decision-making.
In an appeal for forward-thinking guidelines, the letter requested that the SEC employ a principles-based approach similar to recent staff statements concerning proof-of-work mining. The POSA expressed optimism about their ongoing dialogue with the SEC, noting that a constructive relationship has begun to surface since the past four months.
The Proof of Stake Alliance represents an impressive roster of prominent cryptocurrency organizations and companies, including venture capital firm Andreessen Horowitz (a16z), blockchain software company Consensys, and the crypto exchange Kraken, which recently reinstated its staking services in the U.S.
As of now, the SEC has not approved any crypto staking exchange-traded funds (ETFs) and has decided to postpone its ruling on allowing staking for Grayscale’s spot Ether ETF. Some analysts project that an Ether ETF incorporating staking functionalities could potentially be introduced as early as May.
In conclusion, the outcome of this dialogue may play a pivotal role in shaping the future of staking regulations, balancing innovation and compliance within the rapidly evolving cryptocurrency landscape.
