What Does the New Law Mean for Crypto Stakers?
In a move that brings much-needed clarity to the world of cryptocurrency, the UK Treasury has officially confirmed that crypto staking does not fall under the umbrella of a “collective investment scheme” (CIS). This is big news, especially for the crypto community in the UK, which has long sought clear legal guidelines for crypto staking.
On January 8, 2025, the UK Treasury issued an update to The Financial Services and Markets Act of 2000, specifically amending how group investments are defined. The update now specifies that “arrangements for qualifying crypto asset staking” do not qualify as a CIS. This is important because CISs are heavily regulated in the UK, and such a designation would subject crypto staking to stringent rules and restrictions.
So, What Exactly is Crypto Staking?
For those unfamiliar with crypto staking, it’s a process that helps secure certain blockchain networks, like Ethereum and Solana, by allowing participants to lock up their crypto tokens to help validate transactions. In exchange for staking their assets, participants can earn more crypto as a reward. It’s essentially a way for blockchain users to contribute to network security while simultaneously earning passive income.
But until recently, there was confusion surrounding whether staking should be treated as an investment product. The latest update clears this up, confirming that staking is a core component of how blockchain technology works—not a collective investment scheme.
Why Does This Matter?
The distinction is important because collective investment schemes, like exchange-traded funds (ETFs) or mutual funds, are highly regulated by the UK’s Financial Conduct Authority (FCA). If staking had been classified as a CIS, it would have triggered a whole new level of regulatory scrutiny, including mandatory registration, compliance obligations, and possible restrictions on who could participate in staking services.
For crypto advocates and users, this is a win. Staking, which plays a fundamental role in the operation of proof-of-stake blockchains, will now be treated more like a decentralized technology service rather than a traditional investment vehicle.
Bill Hughes from ConsenSys Weighs In
Bill Hughes, a lawyer at ConsenSys, weighed in on the change, calling it a positive development for the crypto space. Hughes explained on social media that the regulation of CIS is extensive, and for good reason: these schemes are designed to protect investors. However, he pointed out that blockchain operations, like staking, are primarily about cybersecurity, not about making a profit from others’ investments. It’s about maintaining the integrity and security of the network, not necessarily about generating income through collective pooling of funds.
What’s Next for Crypto Regulations in the UK?
This regulatory clarification marks the beginning of a broader push by the UK government to formalize its stance on cryptocurrencies. In a statement made in late 2024, Economic Secretary to the Treasury, Tulip Siddiq, mentioned that the government plans to introduce a comprehensive crypto regulatory framework by early 2025. This will likely cover a range of topics, including stablecoins, staking services, and other aspects of the cryptocurrency ecosystem.
The UK’s crypto industry had been vocal in its desire for staking to be excluded from CIS regulations, arguing that staking is fundamentally different from traditional investment schemes. Siddiq echoed this sentiment at a London conference, stating, “For me, it doesn’t make sense for staking services to have this treatment.” She assured attendees that the government was working to remove the legal uncertainty around crypto services like staking.
A Step Towards a Clearer Crypto Future
The UK’s updated stance on staking is part of a larger movement to create a legal environment that supports innovation in the crypto space without stifling it with overly strict regulations. As the government continues to shape its cryptocurrency framework, the clarity around staking is a positive step forward, providing the UK’s crypto users with the certainty they need to engage in blockchain networks confidently.
In the coming months, expect to see more updates on the UK’s crypto regulations, but for now, crypto stakers can breathe a little easier knowing that their participation in proof-of-stake networks won’t be bogged down by heavy regulations typically associated with collective investment schemes.
In short: staking isn’t an investment, it’s cybersecurity—and now it’s officially not a CIS.
