Ex-SEC Chief of Staff Compares Liquid Staking to Lehman, Crypto Industry Fires Back

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

Amanda Fischer, who served as Chief of Employees beneath 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 flexibility for belongings to “be restaked and restaked and restaked” with arguably little oversight.

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

Austin Campbell, founding father of crypto danger and compliance advisory agency Zero Information Consulting, stated that many policymakers proceed to strategy crypto by older lenses.

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

Nonetheless, the query for regulators is in recognizing “who has management,” Campbell stated. “If you happen to can management the protocol and the actions, you could have management of the funds. If you happen to can’t, you don’t. All of it comes right down to the way it’s executed.”

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

Fischer’s studying of the SEC steerage could also be “fairly slender,” Watkins stated, by conflating receipt tokens with extra advanced merchandise.

“It is centered on liquid staking setups the place the supplier does 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 distinguished 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 methods 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.