Liquid staking tokens are not securities like stocks and bonds, the Securities and Exchange Commission said on Tuesday.
The statement from the US’ top financial regulator was the latest in a slew of guidance meant to clarify the legal status of various cryptocurrencies and blockchain-based activity.
In recent months, the SEC has issued similar guidance for memecoins and other staking services.
Liquid staking is the second-largest business in decentralised finance. More than $66 billion dollars worth of crypto is spread across hundreds of liquid staking protocols.
Lido has long been the dominant liquid staking protocol. As of Tuesday, it accounted for half of the liquid staking market, with more than $31.6 billion in deposits.
“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,” newly appointed SEC Chair Paul Atkins said in a statement.
“I am pleased that the SEC’s Project Crypto initiative is already producing results for the American people.”
Last week, Atkins detailed “Project Crypto,” a deregulatory blitz that could turbocharge the integration of traditional financial markets with blockchain technology and enable the creation of financial “super-apps.”
It is part of a larger effort to undo the legacy of Gary Gensler, the head of the SEC under former President Joe Biden.
Gensler’s controversial tenure of almost four years was marked in part by his clashes with the crypto industry.
He frequently said that digital asset markets were rife with fraud and that most cryptocurrencies were securities subject to stringent SEC oversight.
He sued dozens of crypto companies for failing to register with the SEC, including MetaMask developer Consensys.
Last year, the SEC alleged that MetaMask had sold unregistered securities on behalf of Lido and Rocket Pool, two liquid staking services. In February, under the leadership of interim chair Mark Uyeda, the SEC dropped the lawsuit.
The SEC’s statement on Tuesday echoed many arguments long made by industry lawyers, including those in an April 30 letter addressed to SEC Commissioner Hester Peirce.
Liquid staking providers are not engaged in securities transactions, the SEC said Tuesday, because their work isn’t managerial or entrepreneurial. Rather, their work is administrative, the regulator said.
“The Liquid Staking Provider does not decide whether, when, or how much of a depositor’s [crypto] to stake and is simply acting as an agent,” the statement reads.
