A bombshell from the SEC favors Ethereum and Solana!
For those who know how to read between the lines, this is one of the most bullish pieces of news for the Ethereum ecosystem. The bad news is that the market isn't necessarily capable of doing so. The good news is that news like this, if not immediately discounted by the markets, leaves some time to act.
The SEC has published a press release stating that liquid staking tokens are not securities. Therefore, they are not a potential target of the SEC and its legal actions. This step will also be important for $ETH Ethereum ETF staking, which could use liquid staking to address potential liquidity issues, which we'll discuss shortly.
SEC Bombshell: Liquid Staking Is Not a Security
For those who aren't very familiar with DeFi : liquid staking is a process through which we deliver Ethereum to a protocol and receive tokens back that are a sort of receipt of the fact that we staked our $ETH through that protocol.
Such systems also exist in other environments (mainly Solana $SOL ) and are among the most popular in each ecosystem they belong to.
Now the SEC has dropped a bombshell: Liquid Staking tokens, the receipts mentioned above, are not securities, which means they are not investment contracts in the US, which in turn means they are not subject to the extremely restrictive rules the SEC has used in the past to attack a wide variety of projects.
๐ฅRepercussions also for the ETF sector
There will potentially be significant implications for the ETF sector in the US as well. Managers are trying to find a solution to offer staking within their products, but they must address potential liquidity issues, especially on Ethereum.
Direct staking is indeed possible on this network, but this exposes the system to potential queues. If there are outflows from the ETF, or market makers destroying shares due to low demand, this could lead to queue problems, which can last for several days and could render the ETF illiquid with respect to the aforementioned market makers.
This is impossible for a regulated ETF, which is why there are basically two solutions: either stake only a percentage of the ETH you have in your vault, or choose to integrate liquid staking.
Of course, it will take further openness from the SEC, but the fact that the agency has decided to issue a press release of this kind gives us hope.
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