The UK Treasury recently amended a law to clarify that cryptocurrency staking is not classified under the definition of 'collective investment schemes,' which are typically subject to extensive regulation. The industry views this move as a key step in providing legal clarity for proof-of-stake blockchains like Ethereum and Solana.
The UK Treasury issued an order on January 8 to amend parts of the (2000 Financial Services and Markets Act) regarding collective investment, stating that 'qualifying cryptocurrency asset staking arrangements do not constitute collective investment schemes (CIS).'
This amendment clarifies that 'compliant cryptocurrency staking' involves activities for verifying transactions on a blockchain, distributed ledger technology, or other similar technologies.
The amended law will come into effect on January 31.
Consensys's lawyer and global regulatory affairs director Bill Hughes posted on social media platform X on January 9, stating:
This is an exciting development because the management and promotion of collective investment schemes are strictly regulated. The operation of a blockchain is not an investment scheme; at its core, it is a cybersecurity mechanism.
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, a 'collective investment scheme' refers to a method that allows participants to obtain profits or income; such arrangements may include ETFs and investment funds.
This type of collective investment scheme is subject to extensive regulation by the UK's Financial Conduct Authority (FCA), requiring managers approved by the institution to register, obtain authorization, and continuously commit to compliance.
In the cryptocurrency space, staking is a process that allows users of blockchains like Ethereum and Solana to lock up their native tokens and use them to validate on-chain transactions, thereby earning additional tokens as rewards.
The UK Treasury will issue this order, clearly fulfilling a commitment made last November when a draft cryptocurrency regulatory framework was expected to be ready by early 2025.
UK Treasury Economic Secretary Tulip Siddiq stated at a conference in London last November that these regulatory provisions will cover staking services, stablecoins, and cryptocurrencies.
The UK's cryptocurrency industry had previously pushed for staking not to be designated as collective investment, arguing that the regulatory approach should be different. Tulip Siddiq agrees with this point. She said:
It is unreasonable to treat staking services this way for me. The government intends to push for the removal of this legal uncertainty accordingly.
"Breaking! UK amends law to clarify: Cryptocurrency staking is not subject to 'collective investment scheme' legal regulation" This article was first published on (Blocktempo).
