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Liquid Staking Activities and Tokens Are Not Securities, Says SEC
In a recent statement, the United States Securities and Exchange Commission (SEC) has clarified its stance on liquid staking activities and tokens. The agency has ruled that these activities do not fall under securities laws.
According to the SEC’s Division of Corporation Finance, liquid staking activities in connection with Protocol Staking do not involve the offer and sale of securities. This is in accordance with the Securities Act of 1933 and Securities Exchange Act of 1934.
The statement further notes that participants in liquid staking transactions “do not need to register with the Commission transactions under the Securities Act.” This ruling provides a significant boost to the decentralized finance (DeFi) space, which has seen rapid growth and adoption in recent years.
Liquid staking allows crypto holders to deposit their assets with a provider or DeFi protocol and receive equivalent tokens. These tokens represent ownership of the deposited crypto, plus any staking rewards, while allowing holders to maintain liquidity without withdrawing from staking. They can also be used as collateral or in other cryptocurrency applications.
The SEC has defined staking tokens as “receipts” for the assets staked. According to this definition, a Staking Receipt Token is not a receipt for a security because the deposited Covered Crypto Asset is not a security.
In its analysis, the SEC applied the Howey test for investment contracts. This test determines whether an activity constitutes an investment contract or not. The agency concluded that liquid staking providers only perform administrative functions rather than “entrepreneurial or managerial” efforts. They act as agents facilitating staking, without guaranteeing returns.
The decision may have significant implications for the development and listing of spot Ether ETFs (Exchange-Traded Funds). If approved, these funds would enable BlackRock to offer additional yields to investors. The potential approval of these funds could send Ethereum’s price into new discovery and potentially push it to a new all-time high.
In conclusion, the SEC’s ruling has provided clarity on the application of federal securities laws to crypto assets.
Source: cryptopotato.com
