On 8 January, 2025, the UK Treasury moved to provide greater regulatory clarity on the offer of staking services to UK customers, by clarifying that “qualifying cryptoasset staking” does not constitute a collective investment scheme (CIS). The change was implemented by statutory instrument amending the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 and provides a clear example of how governments can support innovation by addressing ambiguity in financial laws and recognise how crypto-assets are different to traditional financial products.
The Change: Staking Excluded from CIS Definition
The statutory instrument explicitly states that “qualifying crypto asset staking” does not amount to a CIS in the UK, meaning those offering staking will not have to try to comply with regulatory requirements which typically apply to funds products and are impractical or uncommercial to comply with in the context of blockchain staking services. The law defines staking as validating transactions on a blockchain, distributed ledger technology network, or similar systems. The change does not affect Earn type products or other staking services which are not linked to validating transactions.
The change will take effect on 31 January 2025, and is a welcome relief for exchanges, blockchain users and developers who rely on proof-of-stake mechanisms.
Why It Matters: Reducing Regulatory Burden
In the UK, collective investment schemes are heavily regulated. They require registration, authorisation, and ongoing compliance commitments, overseen by the Financial Conduct Authority (FCA). As noted above, it is practically impossible for most staking offers to comply as staking services do not operate like typical managed funds. By removing staking from the CIS category, the Treasury ensures that this blockchain process is not subjected to disproportionate regulation and that popular staking services can be offered within the UK.
Having recently announced a pilot using distributed ledger technology to moderinse debt issuance, and clarifying its crypto regulatory roadmap, the UK continues its push to remain a global finance leader in digital finance and set a standard that other Western countries might follow.
The clarification is part of the UK Treasury’s broader effort to regulate crypto assets. Economic Secretary to the Treasury Tulip Siddiq previously announced that a draft regulatory framework for cryptocurrencies, including staking services and stablecoins, is expected by early 2025. This proactive approach could position the UK as a leader in fostering blockchain innovation while maintaining consumer protection.
In Australia, where regulation of crypto-assets mostly has proceeded by enforcement (i.e. see ASIC’s lawsuit against BlockEarner), there has been no attempt to use statutory powers to clarify the legal treatment of crypto products, aside from non-binding guidance in ASIC's draft INFO 225 update, which only seeks to express the regulator’s views of existing laws. In the US under Gary Gensler, a slew of regulation-by-enforcement has been underway, but a recent Court of Appeal judgment slammed that approach, with Judge Bibas saying:-
New inventions create new fraud risks, and [regulators] need to guard against them. But sporadically enforcing ill-fitting rules against crypto companies that are trying to follow the law goes way beyond fighting fraud. It targets a whole industry and risks de facto banning it.
Key Takeaways for Regulators
The UK Treasury’s handling of staking offers a blueprint for other jurisdictions:
Engaging with Stakeholders: Regulators should consult industry participants and consumers to understand the nuances of emerging technologies and decide what outcome is desired.
Avoid Over-Regulation: Ensure regulations are proportionate to the risks without stifling innovation, and meet the outcomes sought in policy.
Provide Clear Definitions: Address ambiguities in laws to reduce legal uncertainties for businesses and users, and give a clear path for good actors to offer products, keeping users from being forced to deal with offshore bad actors.
The UK’s move to exclude crypto staking from the definition of a collective investment scheme is a win for rule of law and innovation. By understanding the unique characteristics of blockchain technologies, policymakers and regulators can create frameworks that balance innovation and consumer protection. As the UK Treasury’s broader crypto regulatory framework unfolds, it looks set to blaze a trial for other jurisdictions seeking to navigate the complex intersection of law and technology.
By Steven Pettigrove, Luke Misthos and Michael Bacina
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