Former SEC Aide Sparks Crypto Industry Backlash Over Liquid Staking Comparison to Lehman Crisis

A former top aide to U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, Amanda Fischer, has drawn significant criticism from the cryptocurrency industry after comparing liquid staking to the rehypothecation practices that contributed to the collapse of Lehman Brothers in 2008 [1]. Fischer, currently affiliated with the financial reform group Better Markets, argued on X that the SEC’s approach to liquid staking effectively “blesses” the same risky asset reuse mechanisms that destabilized Lehman. She highlighted how liquid staking intermediaries generate synthetic tokens, enabling assets to be restaked multiple times with minimal regulatory oversight [1].

Fischer’s remarks reignited a debate about the regulatory framework for staking tokens and raised concerns over the potential systemic risks associated with decentralized finance (DeFi) models. She warned that the decentralized nature of crypto amplifies the risks, allowing assets to be reused repeatedly without clear accountability [1].

However, several industry figures and legal experts have pushed back against Fischer’s characterization. They argue that her interpretation overstates the SEC’s position and fails to distinguish between passive staking and more complex, leveraged products. Kurt Watkins, a blockchain attorney and founder advising crypto startups on regulatory strategy, noted that Fischer’s critique appears to focus narrowly on non-leveraged, passive staking setups, where providers do not exercise discretion and receipt tokens are merely claims on the original asset [1]. Austin Campbell, founder of a crypto compliance advisory firm, added that policymakers often apply outdated centralized frameworks to decentralized systems, leading to misunderstandings about the mechanics and governance of blockchain protocols [1].

High-profile crypto industry representatives also criticized Fischer’s comments as misleading or misinformed. Matthew Sigel of VanEck questioned the coherence of Fischer’s stance, pointing out contradictions in her arguments about SEC oversight [1]. Joe Doll, general counsel at Magic Eden, called the post “incredibly misleading,” suggesting either a lack of understanding of liquid staking or a deliberate misrepresentation [1]. Mert Mumtaz, CEO of Solana infrastructure firm Helius Labs, was even more direct, accusing Fischer of either misunderstanding the technology or being intentionally obtuse [1].

Fischer’s comments reflect broader tensions in the evolving crypto regulatory landscape. While her concerns about potential misuse of staking mechanisms are valid, the industry insists that her interpretation misrepresents the current regulatory stance and the technical workings of liquid staking protocols. The discussion underscores the ongoing challenge of balancing innovation with oversight in a rapidly changing sector [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)