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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 made it clear that liquid staking activities do not fall under securities laws. This declaration has sent shockwaves through the cryptocurrency community, as it paves the way for further innovation in the decentralized finance (DeFi) space.
As per the SEC’s Division of Corporation Finance, certain liquid staking activities do not involve the offer and sale of securities within the meaning of the Securities Act of 1933 and Securities Exchange Act of 1934. This decision means that participants in these activities no longer need to register with the Commission for transactions under the Securities Act.
Liquid staking allows cryptocurrency holders to deposit their assets with a provider or DeFi protocol, receiving equivalent tokens in return. These tokens represent ownership of the deposited crypto, combined with any staking rewards, while enabling users to maintain liquidity without withdrawing from staking. Furthermore, they can be utilized as collateral for other cryptocurrency applications.
In its statement, the SEC defines staking tokens as “receipts” for the assets that have been staked. It asserts that these receipts are not securities because the deposited cryptocurrencies are not considered securities. This decision is based on the Howey test for investment contracts, which examines whether an investment contract exists and if it offers entrepreneurial or managerial efforts.
The SEC concluded that liquid staking providers solely perform administrative functions, acting as agents to facilitate staking rather than making investment decisions. Additionally, they do not guarantee returns, further supporting its stance that these activities are not securities.
However, it is essential to note that the Commission has also emphasized a crucial caveat: if liquid staking providers engage in more complex entrepreneurial activities beyond basic staking services, securities laws may still apply.
This declaration could potentially have significant implications for the DeFi industry, particularly with regards to Exchange-Traded Funds (ETFs). According to ETF expert Nate Geraci, this decision represents the “last hurdle” before the SEC can approve staking in spot Ether ETFs. In essence, if approved, these ETFs would enable investors to gain exposure to staked Ether, offering additional yields.
Crypto analysts largely agree that the green light for staking Ether ETFs could lead to Ethereum’s price entering new uncharted territory, potentially reaching an all-time high.
It is no surprise that BlackRock has already filed a request for a staked Ether ETF, which would permit it to offer added yields to its investors. This decision opens up new avenues for further innovation in the DeFi sector and presents numerous possibilities for cryptocurrency users.
In summary, the SEC’s recent declaration has removed a crucial regulatory hurdle for liquid staking activities and tokens.
Source: cryptopotato.com
