Okay, let's be honest. But as a practical matter it feels like the SEC is moving at the speed of dial-up internet in a 5G world. They've delayed the decision on Franklin Templeton's Ethereum ETF, specifically the staking part, and it's got me wondering: are they protecting investors, or just protecting the status quo?

Innovation or Inaction?

This isn’t just about another ETF. The future of equitable finance hangs in the balance. Will the U.S. take this opportunity to come in and be a player, or sit idly on the sidelines? Franklin Templeton’s proposal to stake any ETH held by the ETF is huge. This approach lets investors get passive income – aka staking rewards – just for holding the ETF. It’s similar to earning bond-like returns in a high yielding savings account, but with the opportunity for significantly higher returns. Truly, this is the kind of innovation that gets new investors in the door excited and spurs new adoption.

They cite to the anti-fraud provision found in Section 6(b)(5) of the Securities Exchange Act, which is meant to prohibit deceptive and manipulative acts. I get it. First, they have to take care of their due diligence, protecting equitable, stable market conditions. Are they truly looking at the big picture or merely afraid of the unknown and anything that disrupts the status quo?

Let's make an unexpected connection here. Consider the challenge of developing a self-driving car. Every time you introduce a new feature, the government sets out roadblocks and insists on a series of tests for every potential innovation, preventing you from pushing the envelope. Where would that leave the U.S. in the global AV race? The same principle applies to crypto.

The only rationale I can divine from the SEC’s current position is that staking is risky by its nature. Staking is already commonplace! Ordinary people do it every day. That’s the equivalent of saying driving a car is too risky, so no one can drive an electric car. It doesn't make sense! Why then, should an ETF, that arguably offers a safer, more regulated path to accessing staking, be treated differently.

Passive Income Revolution?

The most beautiful aspect to staking is that it’s completely passive. You literally earn rewards for holding something. It's a game changer for retail investors. It democratizes the financial space, giving regular people more tools to engage with and connect to the broader financial system in more innovative ways. Besides increasing the value of staked ETH, it further secures the Ethereum network by incentivizing more participation and security.

The SEC’s reluctance stings. It would be a grave disservice to the thousands of people, businesses, and nonprofits who are on the leading edge of improving and creating the future of finance. We're talking about an entire industry that's being held back by regulatory uncertainty.

Instead, the SEC is dragging its feet, initiating formal proceedings, soliciting public comments (deadlines: 21 and 35 days after Federal Register publication - mark your calendars!), and generally creating a climate of fear and uncertainty.

  • Increased Adoption: Staking rewards make Ethereum more attractive to investors.
  • Enhanced Security: More staking strengthens the network against attacks.
  • Passive Income: Investors earn rewards simply by holding ETH.
  • Global Competitiveness: The U.S. becomes a hub for crypto innovation.

First off, let me preemptively state that I’m not advocating for the SEC to not enforce the law. That’s definitely not what we want, but there’s a fine line between responsible regulation and crushing innovation. The U.S. is already falling behind other countries in adopting crypto. If we allow this to happen, we will be shooting ourselves in the foot and ceding our competitive advantage. If we don’t act, we might as well hand the future of finance to those countries that are more transparent and more visionary.

Falling Behind, By Design?

Even stronger than the sense of betrayal, there’s a palpable sense of anger in the crypto community. People are increasingly viewing the SEC’s actions as beyond the realm of caution to be positively destructive. It feels like they're protecting the interests of large, established financial institutions at the expense of smaller, innovative crypto companies. This is a perfect case study in how regulatory capture can impede innovation.

Here's the thing: the SEC isn't rejecting the proposal...yet. The delay itself is, of course, a rejection. It sends a message that the U.S. is not really serious about crypto. It discourages investment and innovation. It further puts crypto companies at a competitive disadvantage.

1. Make Your Voice Heard: Submit your comments to the SEC. Explain why you think Ethereum staking is a good thing and why they should approve Franklin Templeton’s ETF.

2. Educate Others: Share this article (and others like it) to raise awareness about the SEC's actions and the potential consequences.

3. Support Innovation: Invest in crypto companies and projects that are pushing the boundaries of what's possible.

History is being made at this very moment and we urge you to make it positive. Let’s come together as an industry and ensure that the SEC does not pen a tale of the U.S. being left in the dust. Together, we can make sure the U.S. stays ahead in this global race.

3. Support Innovation: Invest in crypto companies and projects that are pushing the boundaries of what's possible.

The future of finance is being written right now. Let's not let the SEC write a story where the U.S. is left behind. Let’s ensure the U.S. remains competitive in the global landscape.