The recent guidance from the US Securities and Exchange Commission (SEC) on liquid staking has sparked optimism within the crypto industry. Many believe that this guidance could pave the way for staking to be allowed in spot crypto exchange-traded funds (ETFs) in the near future.
Nate Geraci, co-founder of The ETF Institute, described the guidance as “the last hurdle” before the SEC could potentially approve staking in spot Ethereum (ETH) ETFs. He highlighted that liquid staking tokens (LSTs) could be used to manage liquidity within funds, addressing a key concern for the Commission.
The SEC Division of Corporation Finance also expressed a positive view on liquid staking activities, stating that they do not involve offers or sales of securities. Staking receipt tokens (SRT) were identified as functioning as receipts for underlying assets rather than securities themselves.
LSTs offer a way for funds to maintain staked exposure while keeping it liquid. This allows for on-chain staking rewards to be maintained, while holding a transferable receipt token that can be used for various portfolio operations, collateral, or redemptions without needing to fully unwind staking positions.
Lucas Bruder, CEO of Jito Labs, commended the SEC’s nuanced understanding of liquid staking arrangements. He expressed optimism about the potential for expanded use of LSTs in both traditional and novel financial instruments, including ETFs.
Industry players, including Bruder, recently met with the SEC to discuss staking rules for ETFs. The meeting highlighted the use of LSTs to address concerns about redemption timing, with participants emphasizing that LSTs within an ETP framework streamline the process by avoiding direct involvement in the staking process.
The recent liquid staking statement from the SEC builds upon a previous staff view from May 29, which stated that other forms of protocol staking do not require registration. It also clarified that features like early withdrawals or slashing protection do not automatically convert staking into a securities offering. However, the SEC emphasized that its view applies to specific fact patterns and administrative roles, indicating that arrangements beyond those boundaries may be treated differently.
Overall, the industry is hopeful that the SEC’s guidance on liquid staking could lead to the approval of fully-staked ETFs via LSTs in the near future, offering new opportunities for investors in the crypto space.