The U.S. Securities and Exchange Commission (SEC) has finally softened its stance, officially announcing that liquidity pledges do not constitute an offering of a security, and therefore do not need to be registered. For the decentralized finance (DeFi) ecosystem, this news is a welcome relief from a long drought. Immediately after the announcement, Ether (ETH) broke the $4,000 barrier and the entire DeFi sector rose.
The liquidity pledge has long been a sword of Damocles hanging over the DeFi space. Previously, no one was sure if the SEC would suddenly step in to regulate the business, causing many projects to operate in anxiety. Now that there is official clarification, participants can finally move forward with more confidence. The data speaks for itself: the liquidity pledge market has reached $67 billion – and that’s with regulatory uncertainty. That number is expected to quickly double as the green light is given, with headline agreements such as Lido and Rocket Pool among the biggest beneficiaries.
Liquidity pledges solve the biggest pain point of traditional pledges: locking up funds. Previously, pledging ETH required locking up the funds for a long period of time, during which they could not be used for any other purpose. Now, with liquidity pledging, users can obtain tokenized credentials such as stETH, earning the best of both worlds by earning pledges and maintaining liquidity.
More importantly, this development clears the biggest hurdle for institutional funds to enter DeFi. Institutions are most concerned about regulatory risk, and now that the SEC has signaled its approval, Wall Street funds may soon follow. Giants such as Goldman Sachs and JPMorgan Chase have been working on DeFi for a long time, just waiting for this signal of regulatory approval.
Technology innovation is also expected to accelerate. Developers, who were previously afraid to be bold for fear of hitting regulatory red lines, are now freer to explore. We expect a wave of new and innovative liquidity pledge products with higher yields and better user experiences to emerge in the coming months. Of course, the SEC’s clarification is conditional. Individual programs will continue to be evaluated on a case-by-case basis, meaning that not all products labeled “liquidity pledge” will automatically pass regulatory scrutiny. Project owners will still need to prioritize compliance issues and this should not be interpreted as a blanket license to operate without restrictions.
But overall, this marks a landmark moment in DeFi’s history. From its initial “Wild West” status to regulatory recognition, DeFi is on its way to mainstream adoption, and as the regulatory environment continues to improve, the lines between traditional finance and DeFi will blur further, ultimately driving a true financial revolution.
For investors, this is a golden opportunity for DeFi. With the reduction of regulatory risks, the influx of institutional funds and the outbreak of innovation, the superimposed effect of these three positive factors has provided strong support for the continuous rise of DeFi tokens.
Author: BitcoinKOL，Source: https://bitcoinkol.com/defi-staking-is-no-longer-classified-as-a-security/
