Can decentralized staking solve the securities problem?

The U.S. Securities and Exchange Commission (SEC) is putting further pressure on the crypto industry. On Feb. 9, the SEC and Kraken reached a $30 million agreement on the exchange’s centralized staking program for users.

News of the crackdown has pushed bitcoin prices to three-week lows as investors worry about the risk of regulatory enforcement. ETH’s price also adjusted to the news, marking the token’s worst day of 2023.

While the entire cryptocurrency market fell following the SEC announcement, several projects stood out. For example, decentralized liquidity collateral tokens LDO, RPL, and FXS quickly recovered from strong corrections.

according to analysts Korpi, Kraken, and Coinbase account for 33% of all collateralized ETH. If US-based centralized exchanges are forced to stop offering staking services, derivatives liquidity staking providers could absorb that market share.

According to a recent series of tweets, traders are well aware of this potential outcome, which may be part of the reason why Lido’s LDO, Rocket Pool’s RPL and Frax’s FXS have recovered in the short term. Let’s take a look at some fundamental data points that might support their bullish thesis.

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The fallout from Kraken’s capitulation to the SEC could spill over to other centralized exchanges that offer staking services. While not all SEC commissioners agree with Kraken’s crackdown, the deal puts other companies on top of the wave, such as Coinbase and its Earn program.

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On February 8, Coinbase CEO Brian Armstrong announced that describe He thinks how dire the SEC crackdown on bets will be for U.S. investors.

“We’ve heard rumors that the SEC wants to unstake crypto for retail customers in the US. Let’s hope that’s not true because I believe it’s going to be a bad path for the US if it’s allowed to happen.”

The SEC’s decision to regulate cryptocurrencies through a series of enforcement actions rather than explicit regulation has sparked outrage in the community due to their “anti-crypto” actions.

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If the crackdown on centralized staking services widens, decentralized providers like Lido, Rocket Pool, etc. will take market share from these stakers. Based on the SEC’s decision, Rocket Pool’s Total Value Locked (TVL) quickly reached $1 billion.

Lido, the largest liquidity staking provider, has a TVL of over $8.5 billion. While platform usage did not initially increase significantly following the SEC decision, substantial capital inflows are likely to flow in as users look for new places to stake their ETH.


number ndaily active users more than Lido and TVL | Source: token terminal

Since the SEC decision, the cryptocurrency market has plummeted, but RPL and LDO prices have risen. In the 24 hours following the SEC’s Feb. 9 announcement, RPL jumped 14.5% and LDO jumped 13.2% before correcting to $2.23.


LDO 4-hour price chart | Source: Tradingview

The price increase appears to be due to the massive accumulation of tokens by giant whales.

“The SEC has announced that Kraken will terminate its crypto staking services in the US and pay a $30 million settlement. This may benefit derivative liquid staking tokens such as RPL and LDO. We see many addresses accumulating RPL and LDO “, Lookonchain tweet.

The rise suggests that even as the market falls, investors are betting that platform usage will increase, leading to more institutional fees.

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Ming Ying

As reported by Cointelegraph

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