According to the meeting memorandum disclosed by the U.S. Securities and Exchange Commission (SEC) today (25th), the Crypto Task Force (CTF) led by SEC Commissioner Hester Peirce, known as the "Crypto Mom", met with representatives of asset management giant Fidelity on February 20.

SEC and Fidelity Discuss Collateralization of Crypto ETFs

Fidelity, which issued Bitcoin and Ethereum spot ETFs last year, discussed with the SEC Crypto Task Force staff on "ways to address regulatory issues related to crypto assets". The topics of the discussion include:

• Customer protection rules (Rule 15c3-3) related to interactions between broker-dealers and digital asset securities, which aim to protect the custody and use of customer funds and securities.
• Developing standardized listing rules for digital asset ETPs (ETPs are a general term for exchange-traded products, of which ETFs are a type).
• Clarifying the collateral assets that fund sponsors can choose, as well as the operational rules for collateralization.
• How to handle incentives related to certain blockchain-based tokens and financial instruments, which may cover the regulatory approach to staking rewards, liquidity mining, and other on-chain incentives.

SEC Reportedly to Issue Guidance on Collateralization of Crypto ETFs

It is worth noting that this news indirectly confirms the recent rumor that informed sources said the SEC is "very interested" in opening up collateralization of Altcoins ETFs. Last week, a FOX Business reporter cited sources as saying that the SEC intends to allow Ethereum spot ETFs to be collateralized, and has even asked the industry to provide a memorandum detailing different types of collateralization and their benefits, and that the SEC may soon issue guidance on collateralization.

If the SEC does open up collateralization of Ethereum spot ETFs, experts are optimistic that it will pave the way for institutional and traditional financial participants to adopt Ethereum, and become a key catalyst for Ethereum's rise. It may also open the door for potential future approvals of Altcoin ETFs such as XRP, SOL, and others to be collateralized.

Further Reading: Insider: SEC is "Very Interested" in Collateralization of Crypto ETFs, Could be a Catalyst for ETH?

SEC and MITRE Discuss DeFi and Stablecoin Regulation

On the other hand, a meeting memorandum published by the SEC today also shows that the SEC, with a more relaxed crypto regulatory stance after the departure of hawkish chairman Gary Gensler, is working to understand how to regulate the decentralized finance (DeFi) space.

According to the memorandum, the SEC Crypto Task Force met with representatives of the non-profit research organization MITRE Corporation on February 21. MITRE manages multiple federally funded R&D centers and provides support to various U.S. government agencies in areas such as defense, aviation, homeland security, and cybersecurity.

As the operator of R&D centers funded by the U.S. Treasury Department, MITRE had an in-depth discussion with the SEC on the issues of stablecoin and DeFi regulation:

• Promoting a multi-agency coordinated, logic-based approach to stablecoin regulation, and developing tools to support the collection, processing, and analysis of regulatory input.
• The IVAN digital asset threat sharing platform.
• Research findings on the implicit centralization in the DeFi market.
• Bank stress testing scenarios for the interconnection between DeFi and traditional finance (TradFi).
• The need to implement circuit breakers at the smart contract level to mitigate risk propagation.