SEC Discusses Crypto ETPs With BlackRock, Proof of Stake Alliance

The US Securities and Exchange Commission’s (SEC) Crypto Task Force held separate meetings on April 1 with representatives from BlackRock and the Crypto Council for Innovation’s (CCI) Proof of Stake Alliance to discuss regulatory issues related to crypto exchange-traded products (ETPs).

BlackRock’s attendees included senior representatives from regulatory affairs, product engineering, ETF capital markets, and federal policy. During its session with the Crypto Task Force, BlackRock presented a document detailing existing workflows and the role of market participants supporting the cash model used in ETPs. The firm also addressed how these systems could apply to potential in-kind models for future crypto-based funds. The discussions focused on in-kind redemptions for crypto ETPs traded in the US, highlighting BlackRock's interest in integrating crypto assets into traditional investment portfolios.

Separately, the SEC met with members of the Proof of Stake Alliance under the Crypto Council for Innovation. The group, composed of representatives from firms such as a16z, Paradigm, Consensys, Alluvial, Lido Labs Foundation, and Marinade, discussed staking-related topics and their implications for crypto ETPs. The agenda included reviewing various staking models, including liquid, custodial, and delegated non-custodial staking. Participants also presented staking-as-a-service industry principles intended to inform the regulatory treatment of validator operations and user participation in proof-of-stake networks. The discussion also touched on how staking rewards, validator responsibilities, and service provider relationships factor into the risk profile and valuation of potential staking-enabled crypto ETPs.

The SEC’s engagement with BlackRock and the Proof of Stake Alliance signals continued institutional interest in advancing regulatory clarity for crypto financial products. The discussions follow an earlier meeting held on Feb. 5, during which the SEC’s Crypto Task Force met with representatives from Jito Labs and Multicoin Capital to evaluate the potential inclusion of staking within crypto ETPs. Participants, including Jito Labs CEO Lucas Bruder and Multicoin Capital managing partner Kyle Samani, argued that staking is essential to proof-of-stake (PoS) blockchains such as Ethereum and Solana. They noted that excluding staking from ETPs could diminish investor returns and compromise the functional utility of PoS assets. Jito Labs and Multicoin Capital representatives proposed two models to address the SEC’s concerns. The “Services Model” allows partial staking through third-party validators while maintaining liquidity for redemptions, while the “Liquid Staking Token Model” enables ETPs to hold liquid staking tokens.

While no regulatory outcomes were disclosed, the meetings form part of the SEC’s ongoing review process as it evaluates technical and legal frameworks regarding crypto ETPs. The involvement of major stakeholders such as BlackRock and the Crypto Council for Innovation ensures that the regulatory framework is both practical and forward-thinking. The discussions are likely to focus on establishing robust standards for crypto ETPs, which could attract more institutional investors and further legitimize the crypto industry. The outcome of these meetings could have far-reaching implications for the future of crypto investments, potentially driving further growth and innovation in the sector. However, the success of these discussions will depend on the SEC's ability to balance regulatory oversight with the need for innovation and flexibility in the rapidly evolving crypto landscape.