Canary Capital’s registration statement with the U.S. Securities and Exchange Commission (SEC). This new exchange-traded fund (ETF), the first of its kind, will invest directly in TRX tokens and include staking features. This filing marks the first ETF proposal connected to TRX. At the same time, the crypto industry has been attempting to influence the process by lobbying for staking to be included in exchange-traded products. Lawmakers, crypto firms, and the SEC are in a vigorous debate over the incorporation of staking into regulated financial products. This announcement represents a real breakthrough in that long-standing dialogue.

With this in mind, the planned ETF would provide investors an opportunity to leverage the price fluctuations of TRX. It allows them to distribute rewards to their members via staking. The fund will be backed with real TRX tokens. BitGo Trust Company will handle custody of these tokens, according to the S-1 registration statement filed on April 18.

Staking at the Forefront

Staking is the key building block in the operation and security of Proof-of-Stake (PoS) networks, such as Ethereum and Tron. To take part in the network’s consensus mechanism you have to stake a certain amount of cryptocurrency. This intricate process not only validates transactions but keeps the entire blockchain secure. In exchange for putting tokens at stake, stakers earn rewards in the form of new tokens.

The SEC has long raised issues with adding staking to crypto exchange-traded products (ETPs). These issues mostly deal with regulatory adherence, security threats, and risk of market manipulation. Despite these concerns, crypto industry insiders are pushing to make it happen. Lawmakers aren’t the only ones trying to prod the SEC to allow staking in crypto ETPs.

In February, Senator Cynthia Lummis and other US senators sent a letter to the SEC requesting clarity on the exclusion of staking. On February 5, leaders from across the crypto industry engaged with the SEC’s Crypto Task Force. They showed models that confront the core of the group’s concerns directly. These models were based on the practice of using third-party services to stake and use liquid staking tokens.

Regulatory Hurdles and Delays

The SEC has recently delayed its decisions on two significant proposed rule changes to allow for the creation of crypto ETPs. This has included the Grayscale Ethereum Trust’s recent application to stake some of its ETH holdings. Decisions are now expected by June 2025. The SEC’s Crypto Task Force is central in reaching community concerns about the dangers of crypto and staking. If it truly wants the best, its guidance should set the tone for encouraging a galaxy of staked crypto exchange-traded products (ETPs).

The SEC has stated a number of concerns with allowing staking to be part of regulated financial products. In the past, they have prevented greenlighting the inclusion of staking into any crypto exchange-traded products (ETPs). The SEC’s concern mostly focuses on issues of regulatory oversight, security concerns and the potential for market manipulation.

We believe Canary Capital’s filing is a huge milestone in the process to get staked crypto ETPs to market. If this gets approved, the ETF would create another investment vehicle for investors seeking exposure to the TRX token. It would ensure them the benefits of staking rewards.

Future Outlook

The approval of Canary Capital's proposed ETF is not guaranteed, as it will depend on the SEC's assessment of the risks and benefits of staking. In such a case, the SEC’s decision will almost certainly turn on whether and to what degree Canary Capital and BitGo Trust Company can allay its worries. These issues are regulatory compliance, security threats and market manipulation concerns.

As crypto and staking continue to raise concerns, the SEC’s Crypto Task Force is a group dedicated to addressing concerns with crypto and protections for investors. We know staking is new and innovative, and we’re currently working through its complexities and potential risks with a keen eye. Regardless, their findings will have a huge impact on the future regulatory landscape for crypto ETPs.