Former US Securities and Exchange Commission (SEC) chief of staff Amanda Fischer drew crypto community ire after comparing liquid staking to factors that exacerbated the 2008 global financial crisis.

In a Tuesday staff statement, the SEC stated that it does not consider certain liquid staking activities to be security offerings and, as such, they do not fall under the purview of the agency.

In a post on X, Fischer compared liquid staking activities to the Lehman Brothers’ use of client assets as collateral for the firm’s transactions. The collapse of the investment bank was seen as a climax of the 2008 financial crisis.

“The SEC's latest crypto giveaway is to bless the same type of rehypothecation that cratered Lehman Brothers — only in crypto it’s worse because you can do it without any SEC or Fed oversight,” Fischer said.

SEC Commissioner Caroline Crenshaw also criticized the move on Tuesday. She said that the SEC statement relies on assumptions and provides little regulatory clarity.

Still, SEC Commissioner Hester M. Peirce supported the agency’s decision. “Liquid staking is a new solution to an old problem,” Peirce said in an official SEC statement. She compared liquid staking to a practice that improves the liquidity of fungible goods.

Fischer’s comment sparks backlash

Fischer’s comment did not sit well with the crypto community, which widely saw the new SEC guidance as a win for decentralized finance and institutional crypto adoption.

“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.” VanEck's head of digital assets research, Matthew Sigel, said in a reply on X.

Fischer replied to Sigel, clarifying that the SEC is “blessing” liquid staking as being outside the scope of securities and thus isn’t subject to its jurisdiction. 

Mert Mumtaz, CEO of Helius Labs, compared the transparent decentralized nature of blockchains to the opaque banking system.

“You either have no idea how LSTs actually work or are being intentionally obtuse, “ Mumtaz added.

Jason Gottlieb, a New York-based lawyer, said that Fischer’s comment was neither “technically or legally” correct.

“If blockchain-based rehypothecation were around in 2008, we would not have had the issues that we did,” Gottlieb said.

Resurgence in TVL

Liquid staking protocols currently have a total value locked (TVL) of $66.94 billion across all protocols, up 14.5% year-to-date. Still, the TVL briefly dropped below $30 billion in April, according to DefiLlama.

Related: Liquid staking token launches on Solana with support from Coinbase, Kraken, Galaxy

Lido Finance currently dominates the category with a market share of almost 48%. Its TVL stands at $31.88 billion, down 1.5% year-to-date.

Binance staked ETH, the second-largest liquid staking service, has seen its TVL surge by almost 90% to $11.4 billion, from $6.05 billion at the start of the year.

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