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What Is the Regulatory Risk Associated with Centralized LSD Providers?

Centralized LSD providers face risk of derivative token classification as a security and being forced to censor transactions by regulators.
Greeks.Live19.11.25

What Is the Regulatory Risk Associated with Centralized LSD Providers?

Centralized LSD providers, which manage the private keys and staking operations on behalf of users, face significant regulatory risk. Regulators may classify the derivative token as a security or impose strict KYC/AML requirements on the provider.

Furthermore, a centralized provider could be forced to censor transactions or validators, leading to network-level centralization and a breach of the censorship resistance principle.

How Do Regulators Determine If a Token Is a “Security” or a “Utility”?
How Does an LSD Protocol Maintain the 1: 1 Peg between the Derivative Token and the Underlying Staked Asset?
What Is a “Stablecoin” and How Is It Typically Regulated?
What Is the Main Security Vulnerability Associated with a Small Set of PoA Validators?

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