Caroline Crenshaw, a Commissioner with the U.S. Securities and Exchange Commission (SEC), has
expressed concerns
regarding recent guidance issued by the SEC staff regarding liquid staking, stating that it doesn’t fully capture the nuances inherent in this practice.
The SEC’s Division of Corporation Finance released a statement on August 5,
suggesting that particular types of liquid staking arrangements, particularly those that use receipt tokens, may not be subject to securities laws.
However, Crenshaw challenged this assertion, indicating that the statement might create more uncertainty than clarity when it comes to understanding how liquid staking is treated legally.
“Rather than offering clear guidelines, the recent statement, consistent with other past staff statements, may only further cloud the regulatory landscape.”
Crenshaw emphasized two major issues regarding the
SEC staff’s viewpoint.
She noted that the guidance is based on several assumptions regarding the way liquid staking actually operates, some of which could be perceived as dubious. Additionally, the legal inferences drawn by the staff contain numerous caveats, which might reduce their value for companies trying to stay within regulatory bounds.
She emphasized that any staking activity that doesn’t precisely match the conditions detailed within the document would be deemed outside of its purview. Because of this limited applicability, she argued the guidelines offer limited protection and direction to participants in staking-related activities.
Crenshaw also cautioned investors, pointing out that the guidance reflects the SEC staff’s perspective and not the official position of the entire Commission. Consequently, she suggested the guidance should have been framed as a cautionary note rather than a definitive explanation of regulatory compliance.
Liquid Staking in Crypto Could Mimic Lehman Risks, Warns Expert
Adding to the growing list of concerns, Amanda Fischer, formerly a Chief of Staff at the SEC under
Gary Gensler,
has drawn parallels between the current state of liquid staking and the high-risk financial maneuvers that preceded the Lehman Brothers’ collapse in 2008.
In a
post
on X (previously Twitter), Fischer cautioned that liquid staking could expose crypto markets to the risk of widespread failures. She elaborated that this approach allows users to deposit crypto assets and receive a derivative of the original token. This derivative token can then be redeployed to generate more rewards.
Fischer believes that this mirrors the way Lehman used client funds to support high-stakes trading activities. She suggests that without robust regulatory oversight, liquid staking could create the same vulnerabilities.
The former SEC official also noted the risks associated with trusting token issuers, potential delays when unstaking assets, and the possibility of technical problems or security breaches. Taken together, these factors could amplify systemic risk within the overall cryptocurrency sector.