In extra length, the US is falling behind the world in staking policy. Today, in the first 30 days of the Trump administration, staking is noted at congressional hearings, listed as a top priority of the newly created Crypto Task Force of the SEC and now the focus of a bipartisan letter From lawmakers who challenge the SEC’s previous stance in integration with its exchange products (ETP). Many of the Digital Asset sectors were celebrated when the first ETF area was approved in September last year. It is a giant jump forward for the second largest cryptocurrency, achieving the legitimacy in the eyes of US regulators. But there was a dazzling removal within these financial products: the ability to accept the owners and revenue by doing so.
Now a bipartisan group of lawmakers including senators Cynthia Lummis (R-WY), Kirsten Gillibrand (D-NY), Steve Daines (R-Montana), Bill Hagerty (R-Tenn.), Thom Tillis (R -NC), Bernie The Moreno (R-OHIO) and Ron Wyden (DO) are leading the way to correct that. In a letter delivered to the Securities and Exchange Commission on Friday, they challenge the SEC directive to exclude protocol staking in ETPs, emphasizing how this position could destroy both investor protections and the competitiveness of the US markets.
The SEC ban on staking within the ETP is based on a misunderstanding of how staking works on proof-of-stake networks such as Ethereum. Staking is not a product of investment in itself. Instead, it is a basic technical requirement for securing and validating transactions on proof-of-stake networks. When token holders prevent their properties, they contribute to the security of the network, and in doing so earn the rewards generated by the protocol itself -not from any centralized authority.
International competitiveness
The SEC directive to see those ETP providers to exclude staking has raised serious concerns about America’s competitive position in global digital asset markets. As the United States hesitates, other major financial centers including Switzerland, Canada, Germany and Australia embrace staking in their digital ETP assets, recognizing its important role in network security and operational stability . Just last month, the UK Issued A statutory instrument that recognizes that adjustments for qualified crypto asset staking are not worth a collective investment scheme, strengthening its importance in securing and maintaining blockchain networks.
Because staking is important for securing proof-of-stake networks, it also means that if no one flows into their ether, then all the properties within these ETPs are at risk . This means that, perversely, the SEC forced American investors in a position where their investments were only protected by property -held in other constituents.
Crucially, the impact of these regulations extends beyond the Ethereum blockchain, but applies to the possible future ETPs of other networks that also use proof-of-stakes such as Solana, Avalanche and Polkadot. As the digital asset sector grows, the impact of this misconception will only deepen.
Getting this regulation has made a mistake in both the American investor and the US economy. Either investors receive domestic products without staking and the relevant rewards, limiting their financial returns, or they are looking for exposure through alternative coastal, driving outside of the country and outside of US stock exchanges. Without staking, the ETP -holding ether gradually loses their relative -child -owned network position due to the inflationary characteristic of staking rewards.
This economic fact that it makes it less competitive and less attractive -to investors seeking comprehensive exposure to the Ethereum ecosystem. Although more disturbing, this outcome appears to be opposed to the main mission of SEC investor protection, likely to push investors in investment vehicles to other constituents who may not meet investor protection standards available to US investors
The technical risks associated with staking, when governed by sophisticated validators, are minimal and well understood. The often mentioned “slashing risk” —is a punishment mechanism for dishonest authentication attempts-only affect 0.001 percent of staked ether to date. This data suggests that the SEC’s careful stance may not be proportioned to the actual risks involved.
What is at stake
As we await the SEC’s response to important questions raised by Congress, American investors continue to be in a unique disadvantage. The path forward requires a balanced approach that recognizes staking for what it is – a technical mechanism for network security – while ensuring that there is appropriate administration when it is offered within the regulated investment products.
As the letter points out, while only Congress can create a comprehensive regulatory framework, the SEC has the authority to allow staking in ETPs. Doing so will align with the agency’s mandate to protect investors and the aim of maintaining US leadership in global financial markets.
The Bipartisan Congress letter to SEC Commissioners Uyeda and Peirce who endorse protocol staking in digital asset ETPS is a significant milestone for investors – both the native crypto and institutional. Uyeda noted what he called the “weapon” of the SEC and crypto supporter Paul Atkins’s implementation of the Digital Asset Landscape.
It is beyond the time for the SEC to think of a leadership position when it comes to protocol staking, empowering the digital asset sector. It suits the goals of the American economy and the Americans who rely on it.
