Recently, the U.S. Securities and Exchange Commission (SEC) targeted Kraken's staking service, causing liquid staking tokens to rally.

However, despite the category's total value locked approaching $15 billion, institutions in Asia have not shown much interest in liquid staking, according to Hex Trust's David Cicoria.

Liquid staking enables users to delegate their crypto to network validators while retaining liquidity.

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While it is not decentralized, it is protocol-based, leading some to believe that it may not attract the same regulatory scrutiny as centralized staking services.

Cicoria said that several risks are associated with liquid staking, including de-pegging, the risk of hacks, centralization concerns, and a lack of regulatory clarity.

He added that native staking, also known as direct staking, has garnered interest from institutional investors, but only if actual technical staking is occurring.

He stated that institutional clients have shown interest in liquid staking only when they or the public cannot access the native staking of a particular token.

Cicoria pointed to guidance from the Securities and Futures Commission, which suggests that liquid staking protocols may constitute a "collective investment scheme."

SEC chair Gary Gensler has expressed suspicion of intermediary-based staking platforms, which he claims "look very similar — with some changes of labeling — to lending."

This may be why the SEC targeted Kraken instead of Coinbase, which operates a larger staking pool according to on-chain data.

Hong Kong is currently developing its crypto policy and plans to establish a licensing regime for institutional and retail investors, which may include a framework around staking.

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