SEC Crypto Task Force met with firms to discuss staking, litigation review

The US Securities and Exchange Commission’s Crypto Task Force met with several representatives from the cryptocurrency and traditional finance sectors to discuss regulatory issues impacting digital assets in early February. Key themes included staking, clear guidelines for exchange-traded products (ETPs) and a new framework for policing the emerging asset class. 

According to memoranda available on the SEC’s website, the Crypto Task Force met with the Blockchain Association, an industry lobby group, on Feb. 4.

The lobby group suggested six priority areas the task force should focus on to “tackle issues that impact the digital asset industry.”

In addition to establishing regulatory principles and clearer guidelines, the SEC was requested to adopt a pro-innovation approach to broker-dealers, custodians and exchanges, establish uniform ETP standards, and ensure protocol staking is not classified as a security.

The Blockchain Association also called on the SEC to “review and correct erroneous interpretations of law” made by the previous administration. This “retroactive” review process was outlined by SEC Commissioner Hester Peirce earlier this month. 

On Feb. 5, representatives from Jito Labs and Multicoin Capital met with the Crypto Task Force to discuss the possibility of adding staking to ETPs. According to the SEC document, the representatives described staking as the “true nature” of proof-of-stake tokens.

When the SEC approved spot Ether (ETH) exchange-traded funds last year, it asked issuers to remove the ability for funds to earn staking rewards. According to Jito and Multicoin Capital, “We understand the [SEC] Staff may now be amenable to revisiting staking in ETH and other crypto asset ETPs, including in connection with new applications filed for a SOL ETP.” 

Also on Feb. 5, the task force met with Andreessen Horowitz’s capital management group, AH Capital Management. The discussion centered around token classification and issuance and market intermediaries. 

A separate SEC document showed that the Crypto Task Force met with representatives from Nasdaq on Feb. 6. In addition to bringing regulatory clarity to digital assets, the SEC’s Task Force was requested to clarify the “venues” that are permitted to trade cryptocurrencies.

“It is appropriate to allow non-securities digital assets to be traded alongside securities in the same venues to allow for consistent rule sets,” the Nasdaq representatives said. 

Finally, bankruptcy law firm and former FTX counsel Sullivan & Cromwell sent Colin D. Lloyd to meet with the task force on Feb. 7 to discuss blockchain technology and topics related to securities law. 

Related: SEC launches crypto task force led by Hester Peirce

A new dawn for crypto regulation 

The election of Donald Trump has raised expectations of a major policy shift for the US digital asset sector. The SEC’s Task Force, which is being led by the SEC’s pro-crypto Peirce, was established on President Trump’s second day in office.

Peirce has vowed to clean up the “mess” left behind by former SEC Chair Gary Gensler, who brought more than 125 enforcement actions against the industry during his tenure.

On Feb. 11, the US House Subcommittee on Digital Assets, Financial Technology and Artificial Intelligence heard from five witnesses on the future of crypto regulations in the country. 

Kraken’s deputy general counsel, Jonathan Jachym, called for establishing “fundamental rules for centralized intermediaries,” while the Crypto Council for Innovation’s president, Ji Hun Kim, said policymakers must “unwind the significant damage and uncertainty caused by the regulation-by-enforcement approach by the prior administration.”

Meanwhile, former Commodity Futures Trading Commission Chair Timothy Massad called for major revisions to the STABLE Act, a draft bill that was recently put forward by Representatives French Hill and Bryan Steil. 

Related: Trump’s crypto ventures raise conflict of interest, insider trading questions