Expert Applauds SEC's Protocol Staking Clarity, Boosting Crypto Innovation

Experts commend the SEC's statement clarifying that protocol staking on proof-of-stake networks does not constitute securities, fostering crypto innovation.

What Happened: The Division of Corporation Finance's guidance specifies that staking activities on public, permissionless PoS networks, termed "Protocol Staking" are not investment contracts under the Howey test, as they lack entrepreneurial or managerial efforts from third parties.

Speaking with Benzinga, Kevin Liu, co-founder and CEO of GOAT Network, hailed the SEC's stance as a "welcome advancement" for the crypto industry.

He noted that by recognizing rewards in protocol staking as derived from the protocol itself, not third-party efforts, the SEC provides critical clarity.

This distinction, Liu emphasized, supports decentralized network innovation and benefits participants by establishing clear regulatory guidelines.

Also Read: US Is Poised To Become Global Crypto Hub After Regulatory Breakthrough, Binance CEO Says

The SEC's statement covers self-staking, self-custodial staking with third parties, and custodial arrangements, stating none meet the Howey test's "efforts of others" prong.

Activities like slashing coverage, early unbonding and reward aggregation are deemed administrative, not managerial.

Experts see this as a signal that the U.S. is fostering a regulatory environment conducive to crypto growth, potentially positioning it as a global hub.

Experts view the guidance as a step toward balancing investor protection with innovation.

By clarifying that protocol staking transactions do not require SEC registration, the decision reduces regulatory uncertainty, encouraging broader adoption of PoS networks like Ethereum ETH/USD.

The crypto industry anticipates this clarity will drive further development and investment in decentralized technologies.

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