TL;DR
- Alex Thorn from Galaxy Research expresses concern about the potential classification of staked Ether as a security by the SEC.
- The SEC might be planning a strategy to approve Ethereum ETFs while considering staked assets as securities.
- Additional concern revolves around liquidity challenges and regulatory requirements that could arise if staking is allowed within ETFs.
Alex Thorn, head of research at Galaxy Research, has voiced concern about the possibility of the SEC classifying staked Ether as a security. The concern arises from speculation that the SEC may be nearing approval (or rejection) of an Ethereum-based ETF.
Thorn suggested that the SEC could be preparing a strategy to approve some Ethereum ETFs while still considering staked ETH as a security. This would allow the SEC to maintain its previous stance on classifying Ethereum as an unregistered security while facilitating the introduction of ETFs to the market.
if the speculation about a 180 from SEC on the ethereum ETFs is true, i would guess they try to thread a needle between “ETH” NOT being a security and “staked ETH” (or even more flimsily, “staking as a service ETH”) as BEING a security.
that would be somewhat congruent with…
— Alex Thorn (@intangiblecoins) May 21, 2024
Another additional concern raised is whether staking Ethereum within an ETF could pose liquidity challenges and make it difficult to meet regulatory requirements. Thorn is unsure of the answer but pointed out that collateral lending in ETFs typically has limits, which could serve as a comparable reference point. Additionally, he mentioned that in Europe, exchange-traded products (ETPs) offer staking services, which could provide some clues on how to handle this product in the United States.
The SEC has been trying to classify Ether as a security for some time now. A recent report by Eleanor Terret, a producer at Fox Business, cites court documents filed by Consensys on April 29, suggesting that the SEC and its chairman, Gary Gensler, have considered ETH an unregistered security for at least a year.
The Possibility of Approval for Ethereum ETFs Rises to 75%
Eric Balchunas, senior analyst at Bloomberg, increased the odds of ETF approval from 25% to 75%. This optimistic turn is based on rumors that the SEC may be reconsidering its stance, largely due to the growing politicization of the issue. Balchunas indicated that he has heard conversations suggesting that the regulatory body could be making a 180-degree turn in its approach.
The potential classification of staked ETH as a security could have broad implications for the crypto community. If it decides to proceed in this direction, it could set a precedent for the regulation of other cryptocurrencies and staking-related activities.
On the other hand, the approval of ETH ETFs could open up new investment opportunities and increase their legitimacy in traditional financial markets.
The crypto community and investors are eagerly awaiting the SEC’s next moves, as any decision in this area could have significant effects on the market and the regulation of digital assets.
