SEC Provides Clarity on Liquid Staking Tokens and Digital Asset Regulation

By: Eva Baxter

The United States Securities and Exchange Commission (SEC) has recently outlined that certain liquid staking activities within the cryptocurrency space do not constitute securities offerings, a step that marks significant progress in regulatory clarity for digital assets. In a recent statement, the SEC's Division of Corporation Finance provided guidance that liquid staking and associated Staking Receipt Tokens (SRTs) do not automatically require securities registration. This statement helps delineate the boundaries of what constitutes a securities offer under federal law.

Liquid staking involves the deposit of "covered crypto assets" with a protocol or service provider, resulting in the issuance of SRTs on a one-to-one basis with the deposited assets. These tokens function as receipts, signifying ownership of the staked assets and any potential rewards, all while maintaining the liquidity for use in other applications without the need to unstake the original assets. Notably, the SEC has emphasized that the role of liquid staking providers is administrative or ministerial, rather than managerial or entrepreneurial, thereby not fitting the criteria that would typically necessitate securities regulation.

This recent clarification builds upon the SEC's May statement, which exempted other protocol staking forms, such as self/solo and delegated staking, from registration requirements. The updates offer clearer boundaries regarding how staking is perceived under securities laws, suggesting that structures staying within administrative roles do not fall under securities jurisdiction. The guidance does not extend to providers that deviate from prescribed functions or introduce complexities beyond the described staking model.

Despite the apparent leniency toward existing models, the SEC has pointed out that this is not a blanket approval. Each model might still warrant a case-by-case evaluation as circumstances evolve. Influential figures in the industry perceive this as a pivotal development in establishing a more predictable regulatory framework for digital assets. Liquid staking providers like Lido on Ethereum and Jito on Solana are among those that might benefit from this regulatory clarity, helping them to continue operations without risk of eroding investor confidence.