The Securities and Exchange Commission clarified that protocol staking isn’t considered a regulated activity, greatly enhancing its appeal to financial institutions seeking involvement.
By issuing a letter stating that protocol staking activities are not classified as securities transactions, the U.S. Securities and Exchange Commission (SEC) has made it clear to traditional financial institutions and fintech companies that participation is now open to them.
Proof-of-stake (PoS) blockchains like Ethereum and Solana are expected to gain the most, alongside firms pursuing SEC approval for exchange-traded funds (ETFs) that involve staking assets such as ETH and SOL.
In a statement released on May 29, the SEC staff clarified that using cryptocurrency for staking to validate blockchain transactions does not amount to a securities transaction.
Regulatory ambiguity surrounding staking had deterred Americans from participating due to concerns about potentially breaching securities laws, stated SEC Commissioner Hester Peirce, who now heads the agency’s new Crypto Task Force, in a message shared on the SEC’s website. She added that this hesitation had limited involvement in network consensus and weakened the decentralization, censorship resistance, and trustworthiness of proof-of-stake blockchains.
Although the letter represents a staff statement rather than official guidance from SEC Commissioners, it signals a clear go-ahead to traditional finance, indicating they can now engage in staking without regulatory uncertainty, Alison Mangiero, head of staking policy at the Crypto Council for Innovation (CCI).
Regulatory Green Light for Banks
“Banks, fintech firms, and custodians now have significantly fewer reasons to avoid getting involved. The SEC has delivered a clear message: providing staking services that allow users to maintain control of their assets doesn’t inherently violate securities laws. This marks a major shift toward broader adoption,” she added.
The SEC’s response followed an April letter from the Proof of Stake Alliance under the Crypto Council for Innovation (CCI), which sought clarification on the matter. The letter had backing from 30 companies and industry groups, including a16z crypto, Kraken, and the Solana Policy Institute.
“I think banks and fintech companies will begin exploring both the benefits and hurdles of staking their clients’ crypto assets, as it presents an appealing opportunity for investors aiming to earn returns on their holdings,” said Leah Wald, CEO of SOL Strategies, a publicly listed Canadian company providing access to Solana staking, in an email. She noted that the impact could be significant, driving the creation of innovative financial products with staking components, fueling growth in DeFi, and supporting wider integration of blockchain technology within conventional financial systems.
Traditional financial institutions will increasingly rely on software developed by crypto-native firms and work directly with intermediaries in the crypto space to manage custody and offer staking services, said Bill Hughes, senior counsel and director of global regulatory affairs at Ethereum software company Consensys.
Hughes mentioned that the letter “completely shifts the perspective” regarding the treatment of proof-of-stake tokens as viable investment assets.
“Institutions are beginning to recognize — and many already have — that ETH serves as the digital oil compared to BTC’s gold, offering not just the potential for price appreciation but also the ability to generate extra yield by actively utilizing it,” he said.
Higher Chances for Staking ETFs Approval
Hadley Stern, Chief Commercial Officer at Marinade Labs, said the SEC’s decision opens the door for additional ETF approvals and shows that staking is evolving into a legitimate asset class. Canary Capital chose Marinade Labs’ software for its Solana staking ETF application.
In an email statement, Stern explained that by confirming staking does not qualify as a securities transaction, the SEC has created opportunities for expanded staking solutions among institutions and encouraged wider institutional participation across the U.S.
Sid Powell, CEO and co-founder of Maple Finance, agreed in an email that the SEC’s letter reinforces the argument for spot ETFs that incorporate staking rewards.
He noted that for companies like theirs, which concentrate on institutional on-chain strategies, the development also creates an opportunity to craft more staking-oriented products with fewer legal obstacles.
Liquid Staking Prohibited
It’s crucial to highlight that the SEC specifically emphasized its focus on protocol staking alone.
Stern stated that the SEC has also clearly indicated liquid staking is not suitable for inclusion in ETFs.
The SEC staff warned custodians of staked assets not to use those assets for operational or general business activities. They stressed that custodians must never lend, pledge, or rehypothecate these assets under any circumstances.
The letter further emphasized that custodians must protect staked assets from third-party claims. It prohibits them from engaging in leverage, speculative trading, or any discretionary use of those assets.
