BlackRock Meets with the SEC: Focus on Crypto ETF Staking and Options Regulation, Regulatory Direction Shifts Towards Collaboration

On May 9, 2025, BlackRock Inc. held a meeting with the U.S. Securities and Exchange Commission (SEC) cryptocurrency task force to discuss cryptocurrency staking, options, and asset tokenization of exchange-traded products (ETPs) related to cryptocurrencies. The meeting reflected a shift towards a collaborative regulatory approach under the new leadership of SEC Chairman Paul Atkins. BlackRock Inc. submitted revised documents for the Bitcoin ETF (IBIT) and Ethereum ETF (ETHA), advocating for the inclusion of mechanisms for the physical creation and redemption of assets.

Background and Participants of the Meeting between BlackRock and the SEC

The meeting was held on May 9, 2025, hosted by the SEC's cryptocurrency working group, currently led by Republican Commissioner Hester Peirce, often referred to as "Crypto Mom." BlackRock was represented by senior executives from its regulatory affairs, legal compliance, digital assets, and ETF market departments, including Robert Mitchnick, head of the digital assets department. This meeting was a continuation of the initial talks on April 1, indicating ongoing communication and policy coordination between BlackRock and the SEC on cryptocurrency asset regulation issues.

Key Discussion Point 1: Regulatory Considerations for Incorporating Staking Features in ETFs

One of the core topics of the meeting was exploring how to allow crypto ETFs to incorporate staking features under the current regulatory framework. BlackRock proposed that introducing a staking mechanism in an Ethereum spot ETF could enhance the product's yield potential. However, the company also acknowledged that this move involves complex legal and technical challenges, requiring clear definitions of staking yield ownership, tax treatment, and whether it constitutes a distribution of securities income.

The SEC stated that it is evaluating the regulatory conditions required for ETPs with staking features, including asset custody, investor protection, and market transparency. In recent months, several asset management companies have submitted similar applications to the SEC, indicating high market interest in this feature.

Key Discussion Point 2: Regulatory Standards for Crypto ETF Options

Another important topic was the regulatory design for crypto ETF options. The parties discussed the need to establish position limits and exercise caps, considering the liquidity thresholds of underlying assets. The SEC aims to ensure market stability and prevent manipulation risks through these standards.

Notably, the SEC approved options trading for several Ethereum ETFs, including those from BlackRock, Grayscale, and Bitwise, last month, indicating a more open attitude towards such products. This meeting further clarified the design principles and regulatory direction for future options products.

Key Discussion Point 3: Asset Tokenization and Regulatory Framework

The meeting also covered regulatory issues related to asset tokenization. BlackRock introduced its tokenized shares project in collaboration with BNY Mellon, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), with a fund size of $150 billion, aiming to bring assets on-chain using distributed ledger technology (DLT).

The parties discussed how to promote tokenization development under federal securities regulations and whether transitional regulatory guidelines are needed to help issuers adapt to new asset structures. The SEC also stated that it will continue to work with the industry to clarify the legal attributes and compliance requirements of tokenized assets.

Revision of ETF Documents: Inclusion of Physical Creation and Redemption Mechanisms

After the meeting, BlackRock immediately submitted revised S-1 documents for its Bitcoin ETF (IBIT) and Ethereum ETF (ETHA) to the SEC. According to Bloomberg ETF analyst James Seyffart, the revisions mainly added terms allowing physical creation and redemption, pending SEC approval. This means that in the future, investors could directly subscribe and redeem ETF shares with Bitcoin or Ethereum, rather than being limited to cash mode.

Additionally, the revised IBIT document also added disclosures about quantum computing risks, showing BlackRock's attention to potential technological risks.

Shift in SEC Regulatory Attitude: From Enforcement to Collaboration

The background of this meeting is a clear shift in the SEC's regulatory stance. Newly appointed SEC Chairman Paul Atkins, appointed by President Trump, has publicly expressed support for the innovative potential of digital assets, in contrast to former Chairman Gary Gensler's enforcement-focused stance. Atkins plans to collaborate with legislative bodies to establish a more inclusive regulatory framework.

The SEC's cryptocurrency working group is currently engaging in intensive communication with industry stakeholders through roundtable discussions and other formats, exploring more pragmatic regulatory paths. This meeting with BlackRock is a concrete manifestation of this policy shift.

Overview of Participating Institutions and Products

BlackRock currently manages assets totaling $11.58 trillion, with its Bitcoin ETF (IBIT) having an asset size of $62.9 billion and the Ethereum ETF (ETHA) at $2.6 billion. During the meeting, BlackRock also introduced its digital asset product portfolio, including IBIT, ETHA, and the BUIDL fund, and discussed their market development status.

The SEC was represented by members of the cryptocurrency working group, and under Section 6(b) of the Exchange Act, discussed with BlackRock whether crypto ETFs meet the regulatory thresholds for exchange listing, including market integrity and investor protection standards.

BlackRock Meets with the SEC: Focus on Crypto ETF Staking and Options Regulation, Regulatory Direction Shifts Towards Collaboration

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