For far too long, the United States has fallen behind the rest of the world on poor policy. Now, in just the first 30 days of the Trump administration, there are mentioned in congressional hearings, listed as a highest priority of SEC’s newly created Krypto -Task Force and today is the focus of a top -art letter from legislators who challenge the previous SEC’s attitude of his recording in Exchange-Traded Products (ETPS). Many in the digital asset sector celebrated when the first place Ether ETFs were approved last September. It was a huge leap forward for the second largest cryptocurrency and achieved legitimacy in US regulators. But there has been an eye -catching omission within these financial products: the ability to enter into the assets and profits by doing so.
Now a Toparts Group of Legislators, including Senators Cynthia Lummis (R-WY), Kirsten Gillibrand (D-NY), Steve Daines (R-Montana), Bill Hagty (R-tenn.), Thom Tillis (R-NC), Bernie Moreno (R-Ohio) and Ron Wyden (D-OR) lead the way to correct it. In a letter delivered to the Securities and Exchange Commission on Friday, they challenge the SEC’s Directive to exclude protocol stays in ETPs, highlighting how this attitude could undermine both investor protection and the competitiveness of US markets.
SEC’s ban on getting within ETPs is based on a defective understanding of how efforts work on proof-of-stake networks like Ethereum. Stacking is not an investment product in itself. Rather, it is a basic technical requirement for securing and validating transactions on proof-of-stake networks. When the token holders enter into their assets, they contribute to the security of the network, thereby earning rewards generated by the protocol itself – not from any centralized authority.
International competitiveness
SEC’s Directive on seeing Ether ETP issuers to exclude poor raising serious concerns about America’s competitiveness in global digital asset markets. While the United States is hesitant, other major financial centers, including Switzerland, Canada, Germany and Australia, have embraced efforts in their digital active ETPs and recognized its integrated role in network security and operational stability. Just last month, the United Kingdom issued a statutory instrument that acknowledged that crypto -active qualification events do not constitute a collective investment scheme, which strengthens its importance to secure and maintain blockchain networks.
Because effort is important to secure proof-of-stake networks, it also means that if no one inserted their ether, all the assets within these ETPs would be at risk. This means that SEC has forced into a position where their investments are only protected by assets held in other jurisdictions.
Of crucial importance, the impact of these rules extends beyond only Ethereum Blockchain, but applies to possible future ETPs of other networks that also use Proof-of-Stake such as Solana, Avalanche and Polkadot. As the digital asset sector grows, the effect of this misleading regulation will only elaborate.
To get this regulation incorrectly damages both US investors and the US economy. Either investors accept domestic products without getting involved and the affiliated rewards, which limit their financial returns, or they seek exposure through off-shore alternatives, driving capital offshore and out of US exchanges. Without efforts, Ether ETP holders gradually lose their relative network ownership position because of the inflationary nature of inserting rewards.
This economic reality makes us products less competitive and less attractive to investors seeking extensive exposure to the Ethereum ecosystem. Even more worrying, this result seems to contradict SEC’s core task of investor protection, likely to push investors against investment vehicles in other jurisdictions that may not meet the investor protection standards available to investors in the US
The technical risks associated with efforts when controlled by sophisticated validators are minimal and well understood. The often quoted “cutting-out risk” a penalty mechanism for dishonest validation trials has only affected 0.001 percent of stack ether to date. This data suggests that SEC’s cautious attitude can be disproportionate to the actual risks involved.
What is at stake
When we wait for SEC’s answers to the important questions that Congress raised, US investors continue to have a clear disadvantage. The path Forward requires a balanced approach that recognizes efforts for what it is – a technical mechanism of network security – while providing appropriate supervision when offered within regulated investment products.
As the letter rightly points out, while only Congress can create a comprehensive regulatory framework, SEC has authority to allow efforts in ETPs. This would adapt to both the agency’s mandate to protect investors and the goal of maintaining US leadership in global financial markets.
The Bipartisan Congress letter to SEC Commissioners Uyeda and Peirce, who support protocol stacks in Digital Asset ETPs, is a significant milestone for investors -both crypto -inborn and institutional. Since Uyeda has criticized what he has called “weapons” of SEC’s enforcement functions and crypto spokesman Paul Atkins, nominated to take over the role of SEC chairman, we have a rare opportunity to make progress with one of the most common problems in questions in the digital asset landscape.
It is without time for SEC to take a leadership position when it comes to protocols that runs the digital asset sector. This fits the ambitions of the US economy and the Americans who are dependent on it.
