SEC Casts Spotlight on Exit Risks in Staked ETH Tokens

The Securities and Exchange Commission's Division of Corporation Finance has shed light on the potential risks associated with staked ETH tokens, specifically through the lens of two popular products: cbETH from Coinbase and stETH from Lido.

According to a September 25 SEC staff FAQ, these tokens can be classified as either digital tools or digital commodities. The key factor in this distinction lies in who retains ownership of the deposited assets and controls the redemption path.

Coinbase's cbETH allows users to sell their token, which transfers the underlying ownership interest and redemption right to the recipient. However, this does not guarantee immediate access to unstaked ETH or a sale at the underlying position's value.

Lido's stETH, on the other hand, operates under a protocol-based model where users can withdraw their ETH through a queue system. The token can also be sold in the secondary market, but its value may differ from that of the underlying staked position due to various constraints and risks.