The U.S. Securities and Exchange Commission (SEC) has once again postponed its decision regarding the structure of crypto ETFs, particularly regarding two key elements: the possibility for these funds to include staking and the “in-kind” asset redemption method. This decision reflects the regulator’s continued hesitation to clearly regulate cryptocurrency-related financial products, despite growing interest from institutional investors.
A growing regulatory vacuum
- Sensitive technical issues: The SEC is seeking to better understand the implications of staking, a transaction validation mechanism on certain blockchains, when integrated into listed funds. Similarly, the “in-kind” method, which involves redeeming ETFs in digital assets rather than cash, raises compliance and security issues.
- A lack of an appropriate legal framework: The postponement highlights the agency’s current inability to rule on financial innovations that challenge traditional stock market standards.
A wait-and-see signal slowing the sector
- Institutional stakeholders are waiting: Several ETF issuers, including BlackRock and Fidelity, were hoping for rapid clarification to launch new products incorporating advanced features such as staking. The postponement creates uncertainty that is delaying investment decisions.
- Growing political pressure: While some elected officials are pushing for more innovation-friendly regulation, the SEC remains cautious, arguing the need to protect investors from the still poorly understood risks of cryptoassets.
Opportunities and risks for crypto ETFs
Opportunities:
- A clear framework for staking could pave the way for more competitive ETFs, offering attractive returns to investors.
- Approval of in-kind redemptions would improve tax and logistical efficiency for crypto ETFs.
Risks:
- A further postponement or definitive rejection could dampen innovative product initiatives in the US markets.
- The lack of clear regulation is fueling the exodus to other, more welcoming jurisdictions.
Conclusion
By postponing its decision on crypto ETFs incorporating staking and in-kind redemptions, the SEC is keeping the sector in a legal limbo that is hampering its development. While the cautious approach is understandable, the lack of clear rules risks hampering financial innovation in the United States. While markets are waiting for strong signals, the regulator is playing for time, at the risk of missing out on a new financial revolution.
