SEC delays crypto ETF staking and in-kind redemption decisions as agency mulls long-term crypto regulatory strategy

The U.S. Security and Exchange Commission has delayed its decision regarding staking ETFs as well as in-kind creations and redemptions for several cryptocurrency exchange-traded funds to later this year. The regulator intends to give itself more time to assess these rule changes as its in-house crypto task force considers how to implement long-term and comprehensive digital asset regulation. 

The crypto task force was formed to accelerate the creation of sensible guidelines and policies for the crypto industry. So far, the group has met with a number of industry players to gather their recommendations and has rolled back most of the previous administration's enforcement actions against crypto firms. In February, Jito and Multicoin Capital executives met with the SEC to advocate for staking ETFs, which could pay yield generated by locking up assets to investors. 

The first decision to be delayed involved the Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ETF, two ether-focused investment products managed by Grayscale Investments. On Feb. 14, the stock exchange NYSE Arca requested a rule change to let the two trusts stake the held ETH, the native token for Ethereum. The SEC had until Apr. 17 to make a decision, but delayed it to June 1, according to an SEC document filed on Monday. 

Additionally, the Cboe BZX stock exchange proposed rule changes so that it could permit in-kind creations and redemptions for the VanEck Bitcoin Trust and the VanEck Ethereum Trust. In-kind creations and redemptions are when an investor uses the underlying asset, rather than cash, to create or redeem shares of a trust. In this case, those securities would have been the cryptocurrencies bitcoin and ethereum for VanEck's respective ETFs. 

Cboe BZX first proposed the rule change on Feb. 19, leaving the SEC had until Apr. 19 to make its decision to accept, deny or delay the rule changes, as noted in another SEC release. The regulator is now giving itself another 45 days to make that decision, aiming to make the final call on June 3. 

The SEC also postponed a decision regarding in-kind creation and redemption for the WisdomTree Bitcoin Fund to June 3. 

"The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein," Sherry R. Haywood, assistant secretary to the SEC, wrote in a Monday document regarding VanEck's crypto ETFs. 

The VanEck Bitcoin Trust, with its ticker symbol HODL, and the VanEck Ethereum Trust are a spot bitcoin ETF and spot ether ETF, respectively, out of the New York City-based investment management firm VanEck. HODL brought in $19.58 million in volume on Apr. 11, The Block's Data Dashboard shows.