The U.S. Securities and Exchange Commission (SEC) has clarified the status of liquid staking in the market, stating that under specific conditions it does not fall under securities laws. This announcement is a significant development for decentralized finance (DeFi) protocols.
What is Liquid Staking?
Liquid staking allows users to lock their crypto assets like ETH or ADA while still retaining liquidity. When a user stakes through a service provider, they receive a receipt token, which proves ownership of the asset and entitles them to rewards. Additionally, this token can be traded or utilized across various DeFi platforms.
SEC’s Statement on Liquid Staking
According to the latest SEC guidance, the issuance and use of receipt tokens under certain structures does not constitute the offer or sale of securities. This decision is a major win for decentralized finance and affirms the legitimacy of protocols offering staking services.
Risks and the Future of Liquid Staking
While the SEC's guidance is encouraging, it comes with caveats. If the underlying crypto asset is part of an investment contract, this process could still be classified as a securities transaction. Additionally, if service providers manage rewards or promote tokens as investment vehicles, they risk falling under the Howey Test.
The SEC's clarification regarding liquid staking represents a significant milestone in regulatory oversight. It provides a clearer framework for developers, investors, and users, fostering greater confidence in the decentralized finance landscape.
