30s Summary

Donald Trump reportedly plans to replace US Securities and Exchange Commission (SEC) chief Gary Gensler, potentially benefiting Ethereum if a more crypto-friendly successor is appointed. Trump’s options include firing Gensler for a valid reason like incompetence or demoting him and appointing a new chairman, possibly without Senate approval. A new, crypto-friendly SEC could ease current enforcement and allow Ethereum ETFs to offer staking. However, changes won’t happen rapidly, and other agencies could still pursue charges, while courts have the final say on legalities.

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Looks like Gary Gensler, the guy in charge of the US Securities and Exchange Commission (SEC), might be on the outs. Apparently, Donald Trump is planning to put a new person in charge of the commission. Some people think this might have some cool results for Ethereum (ETH), like being able to offer staking rewards that could help boost ETH’s price.

Trump has made several big promises to the crypto industry in the US, one of which was to fire Gensler as soon as he gets into office. But doing that’s easier said than done. According to digital media lawyer Andrew Rossow, the president has the power to appoint and remove some people from their jobs, and that includes an SEC commissioner. But it’s not entirely clear if Trump can directly fire the SEC chairman.

To get rid of Gensler, Trump must have a valid reason, like negligence, incompetence, or bad conduct. Firing Gensler flat out—which would be pretty unheard of—could also cause a backlash for the Trump administration.

Still, Rossow thinks Trump might go for it anyway, given his volatile political style and a lot of frustration in the digital asset industry with Gensler’s approach to regulation.

Legal expert Carol Goforth suggested another way for Trump to remove Gensler from the chairman position without having to kick him out of the SEC altogether. She said Trump can demote Gensler any time and replace him with another commissioner, which could happen instantly. Rossow added that, in many cases, SEC chairs tend to resign when a new president moves into the White House, which would make appointing a new SEC chair more complicated since it needs Senate approval.

Trump has made it known that he wants to put someone who’s more crypto-friendly in charge of the SEC. People hope a new SEC chair would stop the current enforcement actions and make it easier for ETH ETFs to offer staking.

ETHEREUM AGAINST BITCOIN?

The price of Ether hasn’t been meeting market expectations. Compared with Bitcoin, Ether’s performance hasn’t been great. One reason for this is the poor results from the spot Ether ETFs since they were launched. People expected these ETFs to have the same success as the spot BTC ETFs did, but that hasn’t been the case.

Crypto ETF issuer 21Shares’ head of US business, Federico Brokate, described the ETH ETF flows as “somewhat disappointing.” But he’s optimistic about the future, saying he expects the demand for Ether to pick up as there are more clear regulations around ETH as a commodity.

Brokate identified one key factor dragging the ETH ETFs’ performance down: the fact that ETF investors can’t stake ETH. For crypto enthusiasts, staking can be a source of passive income, so those who might be interested in investing early on have probably held off for now.

Researcher and analyst Tom Wan stated that spot Ether ETFs could have a better chance of attracting investors by offering passive yields through staking.

The staking rewards could come in different forms, depending on the regulatory and operational setup. ETF issuers could collect the staking rewards, which would let them drop their management fees and advertise their products accordingly.

As it stands now, ETH ETF issuers charge fees between 0.15% and 0.25%, with Grayscale’s ETF standing out with a much higher fee of 2.5%. Tom Wan pointed out that even staking just 25% of assets under management could generate enough money to completely offset these fees.

Another option would be for the ETF issuer to offer indirect staking benefits to the investor. The investor wouldn’t directly stake their assets but would benefit from the staking rewards generated by the ETF’s pooled assets.

WHY STAKING MATTERS?

Allowing staking on ETH ETFs could be a powerful driving force for both big money institutions and ordinary people to adopt the currency. A shift in SEC leadership could be a huge step for the crypto industry, especially for Ether’s price prospects, as ETFs for other cryptocurrencies like XRP or SOL haven’t been approved yet.

One of the issues the SEC cannot get past is that staking is similar to an investment contract in their eyes, where the profit isn’t just coming from the asset itself but also from a structured process involving other people. This interpretation could mean that staking services would have to adhere to security regulations, which takes into account registration, disclosures and investor protections.

While the crypto community seems optimistic about a new SEC chair taking a more laid back approach, Goforth warned not to expect rapid regulatory changes, even if a more crypto-friendly SEC chair takes over. The new chair may set the mood for the Commission, but they can’t force policy changes alone.

Regardless of who’s in charge though, the Department of Justice could still pursue criminal actions under security laws. Additionally, if there’s a controversial case, a court could step in without the SEC’s say-so, and even a private person who has lost money through staking could file a lawsuit against an exchange. Goforth pointed out that the SEC can decide what actions are taken to court, but their analysis isn’t binding on the courts, and eventually a judge will have the final say in what’s legal.