SEC Says LSTs Are Not Securities: What’s the Impact on Spot Crypto ETFs?
The Securities and Exchange Commission (SEC) through its Division of Corporation Finance has issued a statement regarding liquid staking. According to the agency, liquid staking activities do not involve the offer and sale of securities.
As a result, the U.S. SEC does not require crypto protocols or fund managers to register with the Securities Act regarding liquid staking. The liquid staking activities involve crypto users receiving minted tokens to represent staked tokens, and rewards are paid directly to their wallets.
“Today’s staff statement on liquid staking is a significant step forward in clarifying the staff’s view about crypto asset activities that do not fall within the SEC’s jurisdiction. I am pleased that the SEC’s Project Crypto initiative is already producing results for the American people,” Chairman Paul Atkins noted.
Expected Impact on the Crypto Market
The crypto legal clarity from the U.S. SEC is a huge deal in the altcoin space, especially Ethereum (ETH), Solana (SOL), and all other proof-of-stake (PoS) secured blockchains. Furthermore, crypto investors who have engaged in liquid staking can scale their operations in the DeFi space legally.
According to aggregate data from coingecko, the liquid staking tokens market cap gained 3 percent in the past 24 hours to hover about $86.3 billion. The top liquid staking tokens include Lido Staked Ether (STETH) and Wrapped stETH (WSTETH) with a market cap of about $32 billion and $14 billion respectively.
The legal clarity on liquid staking tokens will impact the spot altcoin ETF market in the near future. For instance, the U.S. spot Ether ETF issuers will likely engage in liquid staking activities to earn extra rewards for their customers.