The UK Treasury has amended a law clarifying that crypto staking — necessary for proof-of-stake blockchains such as Ethereum and Solana — doesn’t fall under the definition of a “collective investment scheme,” which is typically heavily regulated.
A Jan. 8 order from the department amends a section of The Financial Services and Markets Act 2000 about group investments, adding that “arrangements for qualifying cryptoasset staking do not amount to a collective investment scheme [CIS].”
It clarifies that “qualifying cryptoasset staking” means validating transactions on a blockchain, a distributed ledger technology network “or other similar technology.”
The updated law will come into effect on Jan. 31.
The order updates a section of The Financial Services and Markets Act 2000. Source: The National Archives
“This is a good development because the management and promotion of CIS are heavily regulated,” Consensys’ lawyer and global regulatory matters director Bill Hughes posted to X on Jan. 9.
“The way a blockchain works is NOT an investment scheme. It’s cybersecurity,” he added.
Collective investment schemes in the UK are any arrangements where those taking part are given profits or income from it, which can include exchange-traded funds (ETFs) and investment funds.
They are heavily regulated by the country’s Financial Conduct Authority, first requiring registration, authorization and ongoing compliance commitments by agency-approved managers.
Staking is a process where users of a blockchain, such as Ethereum and Solana, can lock up any of the network’s native tokens they own and use it to validate transactions on that network with the incentive of earning extra tokens.
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The order is seemingly a start on the Treasury’s promise in November that a draft crypto regulatory framework would be ready by early 2025.
Economic Secretary to the Treasury Tulip Siddiq told a conference in London in November that the regulations would cover staking services, stablecoins, and crypto generally.
The local crypto industry had pushed for staking not to be designated as a collective investment scheme due to how they’re regulated, to which Siddiq agreed.
“For me, it doesn’t make sense for staking services to have this treatment,” she said. “The government intends to proceed with removing this legal uncertainty accordingly.”
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