Ex-SEC Chief of Employees Compares Liquid Staking to Lehman, Crypto Trade Fires Again – Decrypt

A former high SEC official’s warning that liquid staking might set off crypto’s personal Lehman-style collapse has drawn sharp rebuke from business individuals, reigniting debate over how the U.S. ought to regulate staking tokens.

Amanda Fischer, who served as Chief of Employees below former SEC Chair Gary Gensler, wrote Monday on X that the company’s stance on liquid staking quantities to “blessing the identical kind of rehypothecation that cratered Lehman Brothers.”

Fischer argues that liquid staking creates artificial tokens by intermediaries, permitting belongings to be reused with out clear oversight.

She likened it to “rehypothecation,” which is the reuse of shopper collateral by establishments for their very own trades, as practiced at Lehman Brothers earlier than the 2008 monetary disaster.

In crypto, she warned, the dangers are amplified by decentralization and the power for belongings to “be restaked and restaked and restaked” with arguably little oversight.

But crypto observers say the difficulty isn’t leverage however how regulators see crypto.

Austin Campbell, founding father of crypto threat and compliance advisory agency Zero Data Consulting, mentioned that many policymakers proceed to method crypto by older lenses.

“They dwell in a world that’s centralized and intermediated, as a result of that was the one technique to do issues successfully within the Nineteen Seventies when these programs had been designed,” Campbell instructed Decrypt. “They do not notice that they consider every thing as centralized, so automated programs actually throw them.”

Nonetheless, the query for regulators is in recognizing “who has management,” Campbell mentioned. “In the event you can management the protocol and the actions, you will have management of the funds. In the event you can’t, you don’t. All of it comes all the way down to the way it’s executed.”

Kurt Watkins, a blockchain lawyer and founder who advises crypto startups on regulatory technique, instructed Decrypt Fischer is elevating legitimate issues about how staking will be misused, however argued that her interpretation is “overstating” what the SEC really mentioned.

Fischer’s studying of the SEC steering could also be “fairly slim,” Watkins mentioned, by conflating receipt tokens with extra complicated merchandise.

“It is targeted on liquid staking setups the place the supplier would not train discretion and the receipt token is only a passive declare on the unique asset, not some artificial product or leveraged place,” Watkins instructed Decrypt.

Fischer’s publish has triggered swift backlash from outstanding crypto figures.

First, you say the SEC is blessing crypto. Then you definately say crypto has no SEC oversight. Which is it? You’re contradicting your self mid-rant,” Matthew Sigel, head of digital belongings analysis at VanEck, wrote on X.

Joe Doll, common counsel at Magic Eden, additionally weighed in, calling Fischer’s publish “extremely deceptive.”

It “demonstrates both a misunderstanding of the fundamental technological options that underpin liquid staking (dumb/ill-prepared), or deliberate mischaracterization (malicious),” he wrote.

In the meantime, Mert Mumtaz, CEO of Solana infrastructure agency Helius Labs, was extra direct.

 “Evaluating clear, decentralized programs ruled by auditable code to opaque, shady ones enforced by crooks and saying the previous is worse is insane work,” he responded. “You both do not know how LSTs really work or are being deliberately obtuse.”

Fischer now works at Higher Markets, the identical coverage group that strongly opposed the creation of U.S. spot Bitcoin ETFs.