Amanda Fischer, former SEC chief and staff assistant to Gensler, has sparked controversy with her recent X comment regarding her opinion on liquid staking. The former staff assistant claims that liquid staking carries similar risks to the “double staking” practices used by Lehman Brothers before its collapse in 2008, potentially triggering a systemic collapse in the crypto industry.
This statement comes after the U.S. SEC declared that many liquid staking mechanisms and issuance of staking receipt tokens are not generally considered securities. This comment sparked strong industry criticism, with many calling out Fisher, given that she worked under an administration that enacted restrictive digital asset policies.
Fischer Claims Liquid Staking is Risky
Fischer argues that the SEC’s recent staff guidance remarks regarding liquid staking are promoting unregulated reuse of assets, warning that it could trigger systemic collapse. She said it could replicate the leverage-driven systemic risks seen in the Lehman Brothers’ collapse, but may be even worse due to the SEC’s poor oversight.
Liquid Staking allows users to stake cryptocurrencies via a protocol and receive a staking receipt of the same token. For instance, you can stake ETH and receive stETH as the receipt token, which shows ownership of the underlying asset (ETH). However, you can still stake the receipt token in DeFi repeatedly, generating claims on the underlying asset. This is a practice that critics like Fischer warn could introduce counterparty risks.
She says the practice resembles rehypothecation, where clients reuse the same assets as collateral across several exposures. Because these synthetic tokens proliferate across DeFi, they introduce risks similar to the mortgage-backed derivatives that caused Lehman’s crash.
Crypto Industry Fires Back
Industry experts, such as Mert Mumtaz of Helius Labs and Matthew Sigel of VanEck, have criticized Fischer for her comments. They agree that Lehman-style systemic risk arose from opaque, centralized leverage, not blockchain staking protocols. Mumtaz called her comparison “insane,” saying she has no idea what liquid staking is. Sigel said, “First, you say the SEC is blessing crypto. Then you say crypto has no SEC oversight. Which is it? You’re contradicting yourself mid-rant.”
Kurt Watkins, a crypto legal advisor, addressed Fischer’s comparisons, adding that liquid staking differs from traditional rehypothecation because of blockchain’s auditability and open-source governance. Jason Gottlieb, a New York-based lawyer, described Fischer’s comments as “legal mischaracterization,” arguing that the world wouldn’t have had the issues it does now if blockchain-based rehypothecation existed in 2008.
Fischer isn’t the only one voicing her disapproval of the new staff guidance. Commissioner Caroline Crenshaw said the new guidance “muddles the waters” rather than providing any clarity. She also said the guidance lacks binding legal force. Despite their opinions, Commissioner Hester M. Peirce, aka Crypto Mom, voiced her support for the guidance. In her defence, liquid staking improves liquidity without triggering securities laws.
Implications of the New Guidance Regulation
Liquid staking has grown rapidly over the years. Total Value Locked (TVL) in liquid staking protocols stands at $66.9 billion, a 14.5% Year-on-Year. Lido Finance, a DeFi protocol, dominates the LST space with $31.9 billion in TVL.
This statistic highlights the opportunities in liquid staking. With the SEC’s guidance, liquid staking will be treated as non-security under certain structures. This could pave the way for Ethereum ETF staking in yield pools. However, there are still concerns that must be addressed.
Fischer’s comparison to Lehman’s collapse might be overboard, but it highlights concerns about restaking and the systemic risks involved. She advocated for a clearer framework, rather than staff-level guidance. A clearer crypto regulation will promote transparency in DeFi among staking protocols, ensuring that they issue staking receipt tokens that accurately represent claims.
The SEC’s Division of Corporation Finance clarified that, under certain structures, liquid staking and the issuance of staking receipt tokens generally do not constitute offers or sales of securities. In such arrangements, users deposit crypto assets with a protocol or service provider and receive tokens evidencing ownership of the staked assets and any associated rewards. The SEC hopes the new “Project Crypto” regulation will provide more clarity on the guidance rules.
