Ethereum News Today: SEC splits on liquid staking guidance as crypto market braces for regulatory uncertainty

The U.S. Securities and Exchange Commission (SEC) recently issued guidance on liquid staking, triggering an internal divide and uncertainty in the crypto market. The guidance, released by the SEC’s Division of Corporation Finance on August 5, 2025, clarified that tokens generated through liquid staking—such as those on Ethereum—are not considered securities under U.S. law [2]. This interpretation effectively removes them from the regulatory framework of the Securities Act of 1933 and the Securities Exchange Act of 1934 [2]. However, the guidance has faced strong criticism from within the agency, with Commissioner Caroline Crenshaw voicing concerns over its lack of clarity and potential to create regulatory confusion [2]. She warned that the guidance could foster a “false sense of security” among market participants and understate the systemic risks associated with liquid staking mechanisms [2].

Amanda Fischer, former Chief of Staff to SEC Chair Gary Gensler, has also raised concerns, comparing liquid staking to the rehypothecation practices that contributed to the 2008 financial crisis [1]. She argued that liquid staking tokens—created when digital assets are locked in protocols and used across multiple transactions—create a “false illusion of liquidity” and could lead to financial contagion during downturns [1]. Fischer’s comments have been met with pushback from the crypto community, with developers and project founders dismissing her concerns as “alarmist” and “misinformed” [2]. They emphasize that blockchain’s transparency and public auditability distinguish liquid staking from opaque pre-2008 banking practices [2]. James Mallory of ChainProof Research underscored the fundamental differences between derivatives and on-chain financial tools [2].

The SEC’s internal division is reflected in divergent views from its commissioners. While Crenshaw raised red flags over potential risks, Commissioner Hester Peirce praised the guidance as a step toward a more neutral regulatory environment that supports innovation [2]. This split highlights the broader regulatory uncertainty surrounding crypto assets and the challenges of balancing risk mitigation with industry growth.

The guidance’s financial implications are significant, given the scale of liquid staking activity. With over $66 billion locked in liquid staking protocols across networks like Ethereum and Solana, the sector’s expansion has intensified concerns about systemic risk [2]. The SEC’s decision to exclude these tokens from securities classification has sparked optimism among industry participants, particularly regarding potential integration into financial products such as ETFs [4]. However, the lack of clear definitions and the absence of direct reactions from major Ethereum developers have left many questions unanswered [2].

The timing of the guidance coincides with a surge in the crypto market, as Bitcoin reached an all-time high of $122,000 in July and the global crypto market cap surpassed $4 trillion [2]. Amid these developments, financial commentator Robert Kiyosaki has warned of an impending market correction, citing historical patterns and inflated asset valuations [2].

As the debate continues, stakeholders face a rapidly evolving regulatory landscape. While some advocate for caution to avoid repeating past financial missteps, others emphasize the importance of fostering innovation with transparency. The future of liquid staking and the broader crypto market will likely depend on how these tensions between regulators and market participants evolve.

Source:

[1] https://www.ainvest.com/news/amanda-fischer-compares-crypto-staking-lehman-risk-faces-industry-pushback-2508/

[2] https://www.law360.com/securities/articles/2373153/sec-deems-liquid-staking-outside-its-crypto-purview

[4] https://cryptodnes.bg/en/crypto-legislation-moves-forward-amid-gop-infighting-over-cbdc-ban/