The United States Securities and Exchange Commission (SEC) has issued non-binding guidance on liquid staking aimed at providing institutional investors with some regulatory clarity.
This guidance outlines the SEC’s current considerations for investment advisers dealing with client assets involved in liquid staking. However, agency officials explicitly stated the guidance is non-binding and does not necessarily reflect the agency’s definitive stance on the overall regulatory status of liquid staking products themselves.
Liquid staking protocols allow investors to earn blockchain network validation rewards (staking rewards) while simultaneously utilizing derivative tokens representing their staked assets in decentralized finance (DeFi) applications.
Despite the advisory, fundamental concerns regarding the precise regulatory classification of liquid staking arrangements remain unresolved. Furthermore, the guidance does not address the significant tax implications associated with rewards earned through liquid staking activities, leaving this area ambiguous.
While the information provides some parameters for institutional participation, the SEC emphasizes the non-definitive nature of its comments. Significant regulatory and tax uncertainties persist, demanding further interpretation and leaving potential for future policy shifts impacting the sector.