Table of Contents
- SEC: Liquidity Staking Does Not Necessarily Constitute Securities Issuance
- What is Liquidity Staking?
- Internal Disagreements
SEC: Liquidity Staking Does Not Necessarily Constitute Securities Issuance
The SEC explained in a statement that if cryptocurrency holders participate in staking through a protocol and receive so-called “liquidity staking tokens,” these activities do not necessarily constitute securities issuance or sale, depending on specific facts and circumstances, and are not regulated by the Securities Act of 1933 and the Securities Exchange Act of 1934. SEC Commissioner Paul Atkins stated:
“This statement is a significant advancement for the SEC in clarifying regulatory boundaries, indicating which cryptocurrency activities fall outside of our jurisdiction.”
This statement is viewed as part of the response to regulatory recommendations issued by the White House’s Digital Assets Working Group and is closely related to the SEC’s ongoing “Project Crypto” regulatory reform initiative.
What is Liquidity Staking?
“Liquidity staking” refers to the process of staking cryptocurrency assets into third-party protocols and receiving freely tradable staking receipt tokens (LSTs), which can be used for lending, trading, or other DeFi applications without waiting for an unstaking period.
This mechanism addresses the issue of insufficient liquidity in traditional staking, balancing yield and flexibility, and has quickly become a popular choice for both institutional and retail investors. The SEC has made it clear that if the provider only performs administrative functions and issues tokens representing ownership (such as LSTs), without relying on the efforts of others to generate returns, it does not trigger the Howey Test and thus does not constitute securities issuance.
Currently, liquidity staking has become one of the most important sectors in the cryptocurrency industry. According to DefiLlama data, the total locked value (TVL) of liquidity staking protocols across the network has approached $67 billion, with Ethereum accounting for as much as $51 billion. Major platforms include Lido Finance, Rocket Pool, Ankr, and others.
The SEC’s statement also creates policy opportunities for the increasingly popular liquidity staking ETFs. Companies such as VanEck, Bitwise, and Jito Labs are urging the SEC to approve Solana-based liquidity staking ETFs to expand participation from mainstream investors. Alluvial CEO Mara Schmiedt stated:
“This clarification will allow institutions to more confidently integrate liquidity staking tokens (LSTs) into their products, further developing secondary markets and creating new revenue sources.”
Internal Disagreements
Although this statement has received broad support from the industry, there are clear internal disagreements within the SEC. Commissioner Caroline Crenshaw publicly criticized the statement as making things “more ambiguous,” filled with hypothetical premises and lacking practical industry basis, warning participants to “be cautious of potential risks.” She wrote:
“This statement is built on a shaky wall of facts, without a clear industry basis, which will only confuse regulatory boundaries.”
In contrast, SEC Commissioner Hester Peirce, who has consistently supported loosening cryptocurrency regulations, expressed her support: “This is merely a modern version of depositing assets with an agent and receiving a receipt; it’s not complicated.”
