Former SEC Chief of Staff Amanda Fischer's comparison of liquid staking to factors that exacerbated the 2008 global financial crisis sparked discontent within the crypto community.
In a statement on Tuesday, the SEC said that certain liquid staking activities are not considered securities offerings and therefore are not within the agency's regulatory scope.
Fischer likened liquid staking to Lehman Brothers' practice of using customer assets as collateral for company trades on social media. The investment bank's collapse is seen as the apex of the 2008 financial crisis.
"The SEC's latest crypto gift is blessing the same type of re-staking in the crypto space, which is worse because it can happen without SEC or Federal Reserve oversight," Fischer said.
SEC Commissioner Caroline Crenshaw also criticized the initiative, stating that the SEC's statement relies on assumptions and provides almost no regulatory clarity.
On the other hand, SEC Commissioner Hester M. Peirce supports the agency's decision. Peirce stated in a formal statement that "liquid staking is a new solution to an old problem" and compared it to a practice that improves the liquidity of alternative commodities.
Fischer's comments sparked backlash.
Fischer's comments were not well-received by the crypto community, which generally views the new SEC guidance as a victory for decentralized finance and institutional crypto adoption.
Matthew Sigel, head of digital asset research at VanEck, countered, "First you say the SEC is blessing crypto, then you say crypto has no SEC oversight. This is contradictory."
Fischer responded to Sigel, clarifying that the SEC "blesses" liquid staking and that it is not within the scope of securities, thus not under its jurisdiction.
Mert Mumtaz, CEO of Helius Labs, compared the transparent decentralized blockchain with the opaque banking system.
New York attorney Jason Gottlieb said that Fischer's comments were neither "technically nor legally" correct.
Liquid staking total value locked rebounds.
The current total value locked (TVL) in liquid staking protocols is $66.94 billion, up 14.5% year-to-date. However, according to DefiLlama data, the TVL fell below $30 billion in April.
Lido Finance dominates this category with a market share of nearly 48%. Its TVL is $31.88 billion, down 1.5% year-to-date.
Meanwhile, Binance, as the second-largest liquid staking service, saw its staked ETH TVL surge nearly 90%, currently at $11.4 billion, compared to $6.05 billion at the beginning of the year.
