Why the News “Liquid Staking is Not a Security” Matters
In the U.S. financial markets, the term Securities refers to assets regulated by the SEC (U.S. Securities and Exchange Commission). If an asset is classified as a security, it must be registered and comply with the SEC’s strict rules.
In recent years, Gary Gensler, the former SEC Chair, has made it clear that “most cryptocurrencies are securities,” and anyone not registered would face lawsuits.
Most crypto projects have not registered because the regulations are unclear, and there’s no clear path for approval. At the time, even if they tried, the chances of getting approved by the SEC were slim, so many simply moved forward without registering.
This has resulted in:
Investor concerns over regulatory risks
Many crypto projects facing SEC lawsuits
Difficulty in launching ETFs (especially crypto-related ETFs) because the underlying assets were not registered
Financial institutions being unable to invest due to their own compliance rules
Good News Liquid Staking is Not a Security
Recently, the SEC’s Division of Corporation Finance issued a statement declaring that Liquid Staking and Staking Receipt Tokens “do not constitute securities offerings.”
Key impacts:
The SEC has no authority to sue Liquid Staking activities within this scope.
No SEC registration is required to provide such services.
Opens the door for easier ETF creation, without securities-related restrictions.
Institutions can participate in staking under their own compliance frameworks.
Why This Matters for Crypto
1. This could encourage more institutional and corporate capital to flow into staking services legally, which may positively impact liquid staking providers and DeFi platforms. For example, companies could stake ETH on Lido or Rocket Pool to receive stETH or rETH, holding these tokens to earn continuous daily rewards. Furthermore, if regulations in the future recognize these tokens, stETH or rETH could be used as collateral on platforms like Aave for lending and borrowing, It will help increase additional returns. (Currently, Lido has around $36 billion in TVL, while Aave has about $35 billion.)
2. For ETH ETFs, the issue was that ETH held inside an ETF couldn’t be staked to earn yield, where as retail investors holding ETH directly could stake and earn additional income. This put institutions that were limited to ETFs at a disadvantage, and as a result, many viewed Bitcoin ETFs as relatively more attractive because they weren’t missing out on staking yield because Bitcoin doesn’t need yield It’s store of value asset.
If Liquid Staking is confirmed to be non-security:
ETH held by ETFs can be staked.
The ETH ETF narrative shifts from purely speculative to a yield-generating asset.
This opens growth opportunities tied to major market themes like Stablecoins, RWA (Real World Assets), and DeFi.
BlackRock is Showing Interest
BlackRock has been buying ETH heavily in recent months.There’s now a strong possibility that allowing Liquid Staking within ETFs is “close to approval” especially since the SEC has officially said it’s not a security.
If approved, this could open the floodgates for institutional money to flow into ETH and large-scale staking services for the first time.
Summary
This news is not just about regulation, it’s about unlocking entirely new possibilities for ETH and the broader crypto market. When institutions invest in yield-generating assets, we could see massive shifts in both price and capital inflows.