Significant stakeholders within the Solana ecosystem are formally advocating for the U.S. Securities and Exchange Commission (SEC) to approve the use of liquid staking mechanisms for potential Solana Exchange-Traded Products (ETPs). This approach, they argue, would enhance liquidity and capital efficiency compared to traditional staking methods.
Liquid staking allows users to stake their tokens to earn rewards while receiving derivative tokens representing the staked assets. These derivative tokens remain tradable and usable within decentralized finance (DeFi) applications, providing substantial liquidity and freeing up capital for investors without locking funds.
A coalition including Jito Labs, VanEck, Bitwise, the Solana Policy Institute, and Multicoin Capital has explicitly requested the SEC consider liquid staking for Solana ETPs. They highlight the benefits of reduced operational costs and improved accuracy in tracking the underlying asset’s performance, along with the enhanced liquidity.
The push acknowledges regulatory hurdles the SEC must navigate, such as inherent risks like depegging events (where the derivative token loses its peg to the staked asset) and slashing penalties that can reduce staked funds. These risks require careful consideration in any approval framework.
Proponents contrast liquid staking with traditional staking, where tokens are locked for the duration, severely limiting their usefulness for trading or participation in broader financial activities. Liquid staking effectively mitigates this liquidity constraint.
This initiative is part of a larger industry trend where asset managers, including Nasdaq and Grayscale, are also seeking regulatory approval to incorporate staking features within cryptocurrency ETP structures.