Asset management firm VanEck has reconsidered its plans for staking assets in its proposed spot BNB exchange-traded fund (ETF), distinct from its previously launched Solana product.

In an updated S-1 filing with the US SEC, VanEck announced, “The Trust will not employ its BNB in Staking Activities and accordingly will not earn any form of staking rewards or income of any kind from Staking Activities” upon listing. The company also emphasized that there is no certainty that staking will occur in the future.

VanEck noted that avoiding staking may hinder the ETF’s performance relative to directly holding BNB, as investors would miss out on potential staking rewards. This move follows its application for a spot BNB ETF in May which initially indicated that some assets might be staked through trusted providers.

VanEck’s BNB ETF S1 filing. Source: SEC

The revised filing signals VanEck’s intent to steer clear of any staking initiatives amid regulatory concerns. It mentions that there’s insufficient promise that any staking activities will transpire and if they do, a new prospectus would have to be submitted to the SEC first.

“The Trust is not permitted to engage in Staking Activities, which could negatively affect the value of the Shares.”

The filing lacks a detailed explanation for this precautionary stance towards BNB staking, yet hints at worries surrounding potential regulatory scrutiny. It explicitly notes that should the SEC decide BNB is a security, this could affect the ETF’s share value.

The complexity in determining whether any digital asset qualifies as a ‘security’ is recognized by VanEck, indicating that BNB might be classified as such based on existing conditions, or may later be categorized as a security by legal authorities.

As VanEck articulates, the ETF could be dissolved if BNB is deemed a security, unless the management believes in good faith that this classification does not apply.

The SEC’s actions in 2023 against major exchanges like Binance, Coinbase, and Kraken for trading unregistered securities further complicate the scenario for BNB. Even though a federal court sided with secondary sales of BNB not being classified as securities, the debate around staking’s regulatory status continues.

This ongoing uncertainty in the crypto landscape reflects the broader questions around digital assets and their categorization within existing financial regulations.