Recent guidance from the US Securities and Exchange Commission (SEC) on liquid staking is generating considerable optimism within the crypto industry, particularly regarding the future of spot crypto exchange-traded funds (ETFs). This development is widely seen as a significant step toward allowing staking activities within these investment vehicles, potentially unlocking new opportunities for investors.
Paving the Way for Staked ETFs
Industry experts, including Nate Geraci of The ETF Institute, are hailing the SEC staff's latest guidance as "the last hurdle" before the approval of staking in spot Ethereum (ETH) ETFs. A key aspect of this breakthrough is the SEC’s recognition that liquid staking tokens (LSTs) can effectively manage liquidity within funds, directly addressing one of the Commission's primary concerns regarding redemption timing. Furthermore, the guidance clarifies that staking receipt tokens (SRTs) function merely as receipts for underlying assets, not as separate securities, a crucial distinction that simplifies the regulatory landscape.
Understanding Liquid Staking's Mechanism
The SEC's nuanced understanding of current liquid staking arrangements is evident in its view that, under specific structures, these activities do not constitute offers or sales of securities. Liquid staking tokens (LSTs) are instrumental in this framework, allowing funds to maintain liquid exposure to staked assets. This means funds can continue to earn on-chain staking rewards while holding a transferable token that can be utilized for portfolio operations, collateral, or redemptions without needing to fully unwind their staking positions. This builds upon previous SEC staff views that other forms of protocol staking do not require registration, provided they adhere to administrative and ministerial provider roles, reinforcing a cautious yet progressive regulatory stance that could lead to fully-staked ETFs entering the market.
