Imagine a small village in Kenya. Women like our fictional character Aisha are going to be marginally safer and more empowered when she accesses a crypto platform on her smartphone. As testimonials show, she can stake a small amount of TRX, further earning rewards which help pay for school fees for her children. This isn’t a technocratic utopian fantasy from 2050, it’s all happening today. The SEC’s recent stance on crypto staking is particularly alarming. It risks disenfranchising Aisha and millions of other Americans who would benefit from being able to invest in ETFs such as the proposed Canary TRX ETF.
Is Investor Protection Truly Universal?
The SEC’s ongoing reluctance to approve ETFs that would include staking is, on its face, framed as ensuring investor protection. They’re concerned about redemption periods, tax implications, and even the legitimacy of staking services as unregistered securities offerings. Whose investors are they protecting? Are they concerned about the danger that they create? Those who will benefit most from these new technologies – the traveling public and all taxpayers – deserve better. The SEC is so worried about what Wall Street will think that it’s completely ignoring the Main Street in Africa.
I get it. It’s incumbent upon our regulatory bodies to make sure that new financial products provide some level of safety and transparency. The new approach is overkill, like using a bulldozer to plow a driveway. In the meantime, that same nut could help feed an entire continent.
With this ETF, Canary hopes to provide all investors with inflation protection both through TRX price appreciation and staking rewards. Now, it is ready to be a true game-changer for African investors. It provides a unique but moderately accessible entry point into the crypto economy, as well as a source of passive income. BitGo Trust Company would be custodian of the TRX tokens as part of a security enhancement feature. The SEC has been rightly criticized for its long history of opposition to approval of staking in US-listed crypto ETFs and ETPs. This reluctance deeply limits their opportunities moving forward.
Innovation Blocked, Opportunity Denied
The SEC's delays on key rule changes related to crypto ETPs, including Grayscale's request to stake a portion of its Ethereum Trust holdings, are creating a chilling effect. Senator Cynthia Lummis, among others, has justly condemned this policy as discriminatory toward US asset managers. It puts African entrepreneurs and investors at a disadvantage who are keen to take part in the global crypto market.
The SEC’s wariness appears to be based on a somewhat fundamental misunderstanding of what staking is and how it operates. Staking isn’t purely an exercise in earning rewards, it’s a commitment to the network and its protocols and actively participating in its network governance. As noted in the Canary TRX ETF filing, staking is intrinsic to the security and functioning of PoS networks. The SEC’s unilateral move to block staking prevents retail investors from receiving rewards for their investments. This decision undermines the development of a more decentralized and therefore more secure financial system.
Say you’re an African developer working on a blockchain-based ag-finance solution. You can’t just become an innovation incubator because you have access to capital and a supportive regulatory environment. The SEC's actions send a clear message: innovation is not welcome here. This regulatory roadblock exits talent and investment for jurisdictions more hospitable to crypto innovation. In doing so, it gives them the keys to the future of finance.
Who Speaks for Africa's Crypto Future?
Where are the African voices in this debate? To illuminate these realities, the SEC needs to have a serious conversation with African stakeholders. That will further enable them to better understand the specific challenges and opportunities that crypto offers in their area.
We need to listen to Aisha, the Kenyan woman paying for school fees with crypto. If this is the case, we want to hear from the Nigerian entrepreneurs providing blockchain-based solutions for healthcare, education, and logistics. We want to hear from the South African investors who are turning to crypto to escape rampant inflation.
For millions of people across Africa, the SEC’s decisions have tangible implications. It's time for them to listen. It’s time to move away from the indefensible cookie cutter regulatory paradigm. Here’s to championing a more holistic, forward-looking, and equitable finance 3.0! If we don’t, we risk allowing advanced economies to entrench long-standing economic disparities and hold back the development of developing countries.
Perhaps even more scandalous is that staking is central to the security and functioning of PoS networks such as Tron. As the SEC likes to say, their mission is to protect investors. In truth, they are impeding quick access to exciting new technologies that would serve these same investors very well. It’s as if you toss someone into the deep end and then chain them to the bottom. That’s certainly NOT how you teach somebody to swim!
The SEC needs to re-evaluate its stance. It should end its anti-innovation crusade and begin promoting greater financial inclusion. The future of finance—and indeed the future of Africa—may well depend on it.
