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Former Securities and Exchange Commission (SEC) chief of staff Amanda Fischer has drawn the ire of the crypto community after comparing liquid staking to factors that exacerbated the 2008 global financial crisis.
In a Tuesday staff statement, the SEC stated that it does not consider certain liquid staking activities to be security offerings and, as such, they do not fall under the purview of the agency.
In a post on X, Fischer compared liquid staking activities to Lehman Brothers’ use of client assets as collateral for the firm’s transactions. The collapse of the investment bank was seen as the climax of the 2008 financial crisis.
“The SEC’s latest crypto giveaway is to bless the same type of rehypothecation that cratered Lehman Brothers – only in crypto it’s worse because you can do it without any SEC or Fed oversight.” Fischer said.
SEC Commissioner Caroline Crenshaw also criticized the move on Tuesday. She said that the SEC statement relies on assumptions and provides little regulatory clarity.
On the flip side, SEC Commissioner Hester M. Peirce supported the agency’s decision. “Liquid staking is a new solution to an old problem,” Peirce said in an official SEC statement. She compared liquid staking to a practice that improves the liquidity of fungible goods.
Fischer’s comment sparks backlash
Fischer’s comment did not sit well with the crypto community, which widely saw the new SEC guidance as a win for decentralized finance and institutional crypto adoption.
“First you say the SEC is blessing crypto. Then you say crypto has no SEC oversight. Which is it? You’re contradicting yourself mid-rant.” VanEck’s head of digital assets research Matthew Sigel, said in a reply on X.
Fischer replied to Sigel, clarifying that the SEC is “blessing” liquid staking as being outside the scope of securities and thus isn’t subject to its jurisdiction.
Mert Mumtaz, CEO of Helius Labs, compared the transparent decentralized nature of blockchains to the opaque banking system.
“You either have no idea how LSTs actually work or are being intentionally obtuse, “ Mumtaz added.
Jason Gottlieb, a New York-based lawyer, said that Fischer’s comment was neither “technically or legally” correct.
“If blockchain-based rehypothecation were around in 2008, we would not have had the issues that we did,” Gottlieb said.
Resurgence in TVL
Liquid staking protocols currently have a total value locked (TVL) of $66.94 billion across all protocols, up 14.5% year-to-date. However, the TVL briefly dropped to below $30 billion in April, according to DefiLlama.
Related: Liquid staking token launches on Solana with support from Coinbase, Kraken, Galaxy
Lido Finance currently dominates the category with a market share of nearly 48%. Its TVL stands at 31.88 billion, down 1.5% year-to-date.
Meanwhile, Binance staked ETH, the second-largest liquid staking service, saw its TVL surge by nearly 90%, as its TVL currently stands at $11.4 billion compared to $6.05 billion at the start of the year.
Magazine: Ether could ‘rip like 2021’ as SOL traders brace for 10% drop: Trade Secrets
Unlock the Secrets of Ethical Hacking!
Ready to dive into the world of offensive security? This course gives you the Black Hat hacker’s perspective, teaching you attack techniques to defend against malicious activity. Learn to hack Android and Windows systems, create undetectable malware and ransomware, and even master spoofing techniques. Start your first hack in just one hour!
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