Is DeFi in Trouble? Largest Crypto Staker Lido Sounds Alarm After SEC’s Kraken Crackdown
Lido Finance, one of the largest liquid staking programs with over 5 million staked Ethers, has issued uncertainty concerns on the status of Decentralized Financial ecosystems (DeFi) following last week’s $30 million settlement of Kraken exchange with the U.S SEC.
SEC chair Garry Gensler argued that crypto companies offering staking programs have to register for a securities sale clearance. While advocating for more disclosure from crypto staking programs, Gensler is likely to be coming for more companies including Coinbase Global Inc., and Lido Finance.
Lido DAO (LDO) Market Outlook
The Ethereum (ETH) ecosystem is yet to allow withdrawals of staked ethers until the Shanghai upgrade. Meanwhile, Lido Finance continues to offer Ethereum stakers with alternative tokens dubbed Lido Staked Ether (stETH) pegged 1:1 to the ethers. While the company is facing policy uncertainty with other DeFi projects, its future growth prospects are capped. Moreover, Eth stakers will not need to use liquidity staking programs after the Shanghai upgrade.
Nonetheless, the next move from the SEC on staking programs will significantly alter the future outlook for most DeFi protocols.
“I have been getting a lot more questions about ‘does this impact Lido, what are your thoughts on this?” said Jacob Blish, head of business development at the decentralized autonomous organization, or DAO, that manages Lido Finance. “I personally think this is a net benefit for on-chain permissionless liquid staking or staking providers, but it really depends on what the final resolution is.”
If the US regulators eventually conclude that no US individual can interact with any staking services at all, then “we have a different problem,” Blish added. Moreover, the United States controls 25 percent of the global market activity.
