UK Treasury Excludes Crypto Staking From Collective Investment Scheme Regulations

The UK Treasury has revised its regulations, confirming that crypto staking—essential for proof-of-stake blockchains like Ethereum and Solana—does not fall under the definition of a “collective investment scheme” (CIS), which is subject to strict oversight.

8 January 2025 order amended the Financial Services and Markets Act 2000. It specifyied that “arrangements for qualifying cryptoasset staking do not amount to a collective investment scheme.”

The order defines qualifying cryptoasset staking as the process of validating transactions on a blockchain or similar distributed ledger technology. The updated law is set to take effect on 31 January 2025.

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The Clarification Is A “Good Development”

Bill Hughes, global regulatory matters director at Consensys, welcomed the clarification. He called it “a good development” on social media. “The way a blockchain works is NOT an investment scheme. It’s cybersecurity,” Hughes emphasized.

Good news frens. It looks like that, by the end of the month, proof of stake mechanisms underlying certain blockchains (e.g. #Ethereum #Solana) will not be considered collective investment schemes under UK law. This is a good development because the management and promotion of… pic.twitter.com/JJgEO5rmPP

— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) January 9, 2025

In the UK, collective investment schemes are arrangements that pool resources to generate profits or income for participants. This includes exchange-traded funds (ETFs) and investment funds.

Furthermore, these schemes are strictly regulated by the Financial Conduct Authority (FCA). It requires registration, authorization, and ongoing compliance by approved managers.

Staking, by contrast, allows blockchain users to lock up native tokens to validate transactions, earning additional tokens as rewards. The Treasury’s clarification reflects industry feedback that staking should not be treated as a CIS due to its operational differences.

Economic Secretary to the Treasury, Tulip Siddiq, affirmed this stance at a November conference. He said, “It doesn’t make sense for staking services to have this treatment.”

Moreover, the amendment aligns with the government’s commitment to removing legal uncertainties surrounding crypto staking.

This change is part of the Treasury’s broader initiative to establish a comprehensive regulatory framework for crypto assets by early 2025. The upcoming framework is expected to address staking services, stablecoins, and other aspects of the crypto ecosystem.

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UK FCA Rejects 90% of Crypto Firms Seeking Registration

As reported, nearly 90% of cryptocurrency firms applying for registration in the United Kingdom over the past year have been turned down by the FCA.

The high rejection rate stems from the firms’ failure to meet necessary standards, particularly in areas related to fraud prevention and anti-money laundering protocols. The FCA revealed that only four of the 35 crypto firm applications submitted in the last 12 months were approved.

The UK has increased regulatory scrutiny on the cryptocurrency sector, following several high-profile bankruptcies last year. Last year, the FCA introduced new regulations requiring all crypto firms to register with the financial watchdog.

Recently, the UK government also introduced new legislation aimed at clarifying the legal status of cryptocurrencies, non-fungible tokens (NFTs), and carbon credits under domestic law. The proposed Property Bill seeks to define these digital assets as “personal property” and create a specific legal category for them.

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Disclaimer

Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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