A recent statutory instrument aims to remove legal uncertainty surrounding crypto staking and ease blockchain operations.
On 9 January 2025, the UK Government published the Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2025 (SI 2025/17) (the Staking SI) and the accompanying explanatory memorandum (the Explanatory Memorandum).
The Staking SI together with the Explanatory Memorandum confirm that arrangements where a firm provides services to stake cryptoassets on behalf of customers do not amount to a collective investment scheme (CIS). This includes arrangements where cryptoassets are pooled to meet minimum staking requirements. The Staking SI is scheduled to come into effect on 31 January 2025.
The Staking SI states that “[a]rrangements for qualifying cryptoasset staking do not amount to a collective investment scheme”. For this purpose, “qualifying cryptoasset staking” refers the use of a qualifying cryptoasset in blockchain validation, and “blockchain validation” refers to the validation of transactions on (a) a blockchain; or (b) a network that uses distributed ledger technology or other similar technology.
The Explanatory Memorandum provides further and helpful commentary on the types of ‘arrangements’ that are not a CIS. Paragraph 5.1 states “[t]he amendment will ensure that firms have clarity that they are able to offer staking services to their UK customers without being subject to the collective investment scheme rules …”. Furthermore, paragraph 5.3 states that “[s]ome firms have therefore offered a service whereby customers’ cryptoassets are ‘pooled’ to meet the minimum staking requirements. The firm will then undertake the staking on behalf of its customers, frequently delegating the actual operation of the validator node to a specialist third party. If the firm then receives additional cryptoassets it will transfer a portion of the reward to its customers”. Paragraph 5.4 goes on to state that “[t]hese services have a number of characteristics similar to a collective investment scheme” and that “[t]he Government’s view is that it would be undesirable for [such staking] arrangements … to be treated as a collective investment scheme … and their application would represent a significant hindrance to the effective operation of blockchains and staking arrangements provided to customers in the United Kingdom”.
The measures are a positive development, providing significant certainty to the industry that provision of staking services is not caught by TradFi regulatory requirements applicable to CIS — which has previously limited the ability for firms to offer such services. Notwithstanding the Staking SI, given the range and differing structures of available staking and related products (often referred to as ‘earn’ products), it will remain necessary for firms to consider whether there is a CIS characterisation risk for their product / service, particularly when moving beyond models in which the staking is directly linked to blockchain validation.
Finally, we note that the new Staking SI does not exclude staking from application of the UK financial promotion regime for cryptoassets, and firms should continue to assess their financial promotions obligations when offering cryptoasset staking services. We also anticipate that further clarity on staking (and earn products more generally) is likely to be provided by the new UK cryptoasset regulatory regime due for consultation in 2025, which will include specific ownership and disclosure rules on staking.
The full Statutory Instrument and the Explanatory Memorandum are available online at legislation.gov.uk.
