3 Reasons Why Crypto Staking Should Receive Another Look #CriptoNews

Even as cryptoassets continue to make significant inroads into mainstream financial policy conversations, one significant obstacle and gap in the U.S. marketplace continues to hinder industry growth and expansion; the purpose of staking cryptoassets. This obstacle reflects a continued misunderstanding of what staking represents from a technical and network perspective, even if the taxability of staking rewards remains a contentious point for some in the marketplace.

Crypto staking, despite commentary to this effect, is not an investment in a product or service itself; rather it is an integral component of how proof-of-stake blockchains are secured and how transactions that take place on these blockchains are ultimately validated. With SEC Commissioner Hester Peirce leading efforts to pivot and revamp the SEC’s approach to cryptoasset regulation and treatment, there is optimism that this clarification will become more widely understood in U.S. policy circles. February 2025 brought this to the front burner, as the SEC acknowledged the proposal by Grayscale in include staking activities in the Ethereum ETFs already offered by the firm, with a decision expected by May 2025.

As conversations around crypto policy continue to evolve, and acknowledging that the volatility of bitcoin can lead to anxiety for more recent investors, let’s take a look at why crypto staking deserves a fresh look.

Proof-of-Stake Is The Dominant Blockchain

From a market stability as well as a growth perspective it makes sense for policymakers to actively support – or at least not work against – initiatives that support proof-of-stake chains. Regardless of which aspect of the cryptoasset market is examined the result is the same; proof-of-stake chains are the dominant model for innovation and growth moving forward. As per research from Flipside Crypto, approximately two-thirds of smart contracts deployed in 2024 were deployed via Ethereum Virtual Machines, which is language able to be understood by the Ethereum blockchain, which operates with a proof-of-stake consensus methodology.

Stablecoins are another area that has seen substantial increases in interest and investment from both the private sector and individual states such as Wyoming. Specifically both USDC and USDT run on the Ethereum blockchain, and with those two (2) tokens dominating trading volume and market capitalization there is little doubt of the dominance shown by Ethereum in the fast growing stablecoin space.

Both smart contracts and stablecoins are essential for wider adoption of tokenized payments and blockchain-based transactions, and policymakers would be well served to nurture these critical areas.

Staking Will Attract Capital to the U.S.

Tokenized assets are a truly global industry with a number of different states and economic areas vying from dominance. Tactics have included stockpiling bitcoin and other digital assets, passing tax incentives to attract capital, establishing stablecoin friendly regulatory regimes, or passing regulations seeking to offer clarity to the (now) sprawling cryptoasset ecosystem. Given the increased level of competition and pace of movement to attract crypto brokers, miners, and other investors there is no guarantee that the U.S. will retain leadership in the tokenized financial markets of the future.

With the return of President Trump to the White House, accompanied by a pledge to make the U.S. the crypto capital of the world, seems to indicate that this reality is being acknowledged at a policy level. In addition to headlines the fact is that tokenized payments will eventually become the mainstream method of conducting business, blockchain has already been implemented by organizations in every industry, and Wall Street giants are embracing these technologies and trends. The February 2025 announcement by Citadel indicating its plan to provide market making services for the crypto space is just the latest in a long line of events reinforcing this pivot.

Staking Allows Income Production From Crypto

A long-running complaint related to tokenized assets such a bitcoin is that the retail investor is unable to produce income from these holdings, instead having to rely on price increases over time which can lead to speculative bubbles when left unchecked. This dependency on asset price increases has been blamed, and partially correctly, for encouraging previous speculative runs in NFTs, memecoins, and even more well established tokens that have resulted in losses that have totaled in the billions. The very nature of staking allows token holders, who by staking are reinforcing the strength and security of the blockchain, to also receive some income for doing so.

The ability of investors to produce income via staking, for both retail and institutional investors, will open the proverbial door for new and existing investors to benefit from the continued expansion of the cryptoasset ecosystem. In addition to the income able to created via staking the income producing aspect of staking this income stream also has the potential to reduce some of the volatility that has long been associated with crypto investments. Staking, in other words, can benefit investors, allow said investors to generate income, and even play a role in reducing the volatility that can discourage even seasoned investors.