Amanda Fischer Compares Crypto Staking to Lehman Risk, Faces Industry Pushback

Amanda Fischer, former Chief of Staff to SEC Chair Gary Gensler, has sparked controversy by drawing a direct comparison between liquid staking in the crypto industry and rehypothecation practices linked to the 2008 collapse of Lehman Brothers [1]. In a public post on X, Fischer criticized the SEC for its lack of regulatory action on liquid staking, arguing that by not classifying these tokens as securities, the agency effectively sanctions a system where crypto assets are repeatedly restaked with minimal oversight [1]. She warned that this creates a cascade of synthetic tokens that could lead to systemic risks, similar to the leverage-driven mortgage derivatives that played a role in the 2008 financial crisis [1].

Fischer highlighted the role of intermediaries in managing staking activities, emphasizing how the lack of transparency and accountability could leave users exposed in the event of a hack or failure of the underlying protocol [1]. “Assets can be restaked and restaked and restaked—generating synthetic token upon synthetic token,” she wrote, drawing direct parallels to the practices that destabilized Lehman [1]. Her comments were seen as a continuation of the Gensler-era approach, which has been increasingly critical of crypto industry practices under the guise of regulatory protection.

However, Fischer’s analysis has drawn significant pushback from members of the crypto community. Austin Campbell, founder of Zero Knowledge Consulting, argued that regulators are applying outdated centralized financial models to decentralized systems, where leverage is not the central issue [1]. He stressed that decentralized protocols operate under different governance and risk management frameworks, which regulators often fail to recognize [1]. Kurt Watkins, a legal advisor to crypto startups, noted that Fischer’s critique overlooks the transparency and technical safeguards inherent in blockchain protocols, which differentiate liquid staking from traditional rehypothecation [1].

Other industry figures have also challenged Fischer’s framing. Matthew Sigel of VanEck pointed out an internal inconsistency in her argument: “First, you say the SEC is blessing crypto. Then you say crypto has no SEC oversight. Which is it?” [1]. Joe Doll, general counsel at Magic Eden, described the post as “incredibly misleading,” suggesting it either reflected a lack of understanding of the technology or was a deliberate mischaracterization [1]. Mert Mumtaz, CEO of Helius Labs, accused Fischer of either misunderstanding the technology or being “intentionally obtuse,” calling her comparison “insane” [1].

Fischer is the second high-profile figure from the Gensler administration to face backlash over regulatory comments on crypto. Caroline Crenshaw, often regarded as Gensler’s proxy at the SEC, previously made similarly critical remarks about liquid staking [1]. Crenshaw, however, distanced the full commission from the guidance, stating it carries no binding legal authority [1]. Her ongoing efforts to enforce a stringent regulatory approach to crypto have made her a polarizing figure within the commission and the broader industry [1].

The debate highlights the broader tension between regulatory caution and innovation in the crypto space. While Fischer raises valid concerns about the potential for misuse in staking mechanisms, industry participants argue that her critique misrepresents both the technical nature of liquid staking and the current regulatory stance [1]. As the sector continues to evolve, the challenge remains in developing a balanced approach that protects investors without stifling innovation [1].

Source: [1] Ex-SEC Chief of Staff Compares Liquid Staking to Lehman, Crypto Industry Fires Back (https://decrypt.co/333696/ex-sec-chief-of-staff-compares-liquid-staking-to-lehman)