Crypto: SEC Raises Red Flags Over Legal Risks in Liquid Staking

While the crypto industry is still searching for its regulatory compass, the SEC has just spotlighted a rapidly growing practice: liquid staking. In a statement as technical as it is meaningful, the agency specifies that certain forms of liquid staking could escape securities regulation. A welcome nuance, certainly, but one that does not dispel the lingering legal gray areas over the sector. Analysis.

Warning about the legal risks of liquid staking

At the heart of attention: this famous practice that allows staking your crypto while retaining liquidity thanks to “receipt tokens.” A typically Web3 innovation, both agile, ambitious, but legally slippery.

Until now, the SEC left doubt hanging: was it a disguised securities sale? An undeclared financial scheme? Despite this gray area, some projects continued to develop, even mobilizing one million dollars to support the builders of Web3, in a regulatory uncertainty climate that remains heavy.

In its recent statement, the agency partially rules. Depending on facts and circumstances, some of these operations would not fall under the 1933 and 1934 laws governing securities offerings.

In other words, not all cases are treated the same way. This is not an absolution but a first step towards a more nuanced and contextual reading of the regulation.

This opens a door but above all a minefield for the concerned crypto protocols and platforms. Each liquid staking model will now have to prove that it is neither a promise of guaranteed return nor a disguised securities sale. The fog recedes, certainly, but the legal risk remains very real.

Crypto regulation: a new era under Paul Atkins

Behind this change of tone is a change of man. The new SEC chairman, Paul Atkins, embodies a less repressive approach to crypto regulation.

Gone is the strong-arm method à la Gensler; replaced by a more open dialogue between technological innovation and legal framework. The agency indicates that certain forms of liquid staking would not necessarily fall under the current securities laws.

Since Paul Atkins’ arrival, signals of openness multiply: clarification on proof of stake, launch of the Crypto project, approval of ETFs Bitcoin and Ether with in-kind redemptions. Everything indicates a willingness to adapt, not to confront.