Participants in liquid staking, including depositors and providers, do not need to be concerned about securities law disclosures, according to a staff statement from the U.S. Securities and Exchange Commission on Tuesday.
The statement, released by the Division of Corporation Finance, specifically addresses liquid staking, where participants deposit “covered crypto assets” into a third-party staking protocol provider, which then issues receipt tokens to the depositors.
Liquid staking enables users to lock up tokens in proof-of-stake blockchains while retaining access to their funds through derivative tokens, which can be utilized for various DeFi activities. Currently, liquid staking across all blockchains has approximately $67 billion in total-value-locked (TVL), with $31.7 billion in Lido, according to RialCenter data.
Tokens associated with several liquid staking protocols, including Lido, Jito, and Rocket Pool, experienced a slight increase after the SEC statement was released, though they remain down for the day’s trading.
It’s important to note that the SEC had previously issued another staff statement concerning other forms of staking. Similar to the earlier statement, Tuesday’s note on liquid staking is not binding guidance from the Commissioners or regulations that have passed through the SEC’s formal rulemaking process.
Nonetheless, the new statement reflects the agency’s perspective on the matter and indicates that any participant in the crypto industry adhering to the guidance is unlikely to face legal action from the regulator.
Tuesday’s statement specifically addresses the activities of liquid staking providers, including their roles in the earning and distribution of rewards, slashing, and the minting, issuing, and redeeming of Staking Receipt Tokens, as well as other related services. The primary limitation is that the deposited crypto assets must not be “part of or subject to an investment contract.”
“In a Liquid Staking arrangement, the Liquid Staking Provider (regardless of being a Node Operator) does not engage in entrepreneurial or managerial efforts for Depositors receiving this service,” the statement stated.
“These arrangements resemble those discussed in the Protocol Staking Statement regarding ‘Custodial Arrangements.’ The Liquid Staking Provider does not determine whether, when, or how much of a Depositor’s Covered Crypto Assets to stake, acting merely as an agent in connection with the staking of the Covered Crypto Assets on behalf of the Depositor,” it added.
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