Exploring BlackRock’s Engagement with the SEC on Crypto ETPs
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BlackRock’s Discussion with the SEC: A Potential Shift in Crypto ETFs?
In a significant development, executives from BlackRock, a prominent American investment firm, engaged in discussions with the U.S. Securities and Exchange Commission (SEC) regarding cryptocurrency spot exchange-traded products (ETPs). This meeting underscores the expanding interest of the United States in the burgeoning cryptocurrency market.
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BlackRock and SEC Deliberate on Staking in ETFs: Is Approval Imminent?
According to a memo released by the SEC, BlackRock representatives met with the agency’s crypto task force, led by Commissioner Hester Peirce. The discussion focused on several regulatory issues related to crypto assets. A key topic of interest was the incorporation of staking in ETFs, a subject gaining significant traction recently. BlackRock aimed to gain insights into the Commission’s stance on staking and explore the possibility of authorizing exchange-traded funds that feature staking options.
In a related development, the New York Stock Exchange (NYSE) filed for a proposed rule change in February to introduce staking in the Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ETF. Should the SEC grant approval, Grayscale could lock portions of its crypto assets in ETFs to generate additional income for the Trust. Despite intermediate deadlines in May and August, Bloomberg analyst James Seyffart suggested that the Commission might withhold approval until the final deadline in October. Alongside Grayscale, the Chicago Board of Exchange (Cboe) has also submitted a similar request for the 21Shares Core Ethereum ETF.
Advancing Tokenization and Establishing Crypto ETP Approval Standards
Beyond the discussion on staking, BlackRock and the SEC deliberated on enhancing the tokenization of securities under existing federal securities laws. BlackRock, known for its BUIDL token—an investment in high-quality government securities like treasury bills—expressed interest in this area. Furthermore, both parties recognized the need for well-defined standards to govern the approval or rejection of crypto ETPs, considering Section 6 of the Exchange Act. This section mandates that ETP trading occurs solely on regulated exchanges.
In the interim, BlackRock proposed the establishment of a provisional regulatory framework for ETP issuer activities. Additionally, the conversation touched on setting position and exercise limits for crypto ETP trading options, with a focus on how the liquidity of underlying assets could influence these limits. As of now, the total value of the crypto market stands at $3.22 trillion, marking a 1.19% increase in the last 24 hours.
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