The UK Treasury has revised its regulations, confirming that cryptocurrency staking, essential for proof-of-stake blockchains such as Ethereum and Solana, does not fall within the definition of a “collective investment scheme” (CIS), which is subject to rigorous supervision.
8 Ordinance of January 2025 amended the Financial Services and Markets Act of 2000. It specified that “arrangements for the staking of qualified cryptoassets do not amount to a collective investment plan.”
The ordinance defines the qualification cryptoassets staking as the process of validating transactions on a blockchain or similar distributed ledger technology. The updated law is set to will come into force on January 31, 2025.
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Clarification is a “good development”
Bill Hughes, director of global regulatory affairs 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, brothers. It appears that, by the end of the month, the proof of stake mechanisms underlying some blockchains (e.g #Ethereum #Solana) will not be regarded as 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 generate profits or revenue for participants. This includes exchange-traded funds (ETFs) and investment funds.
Furthermore, these schemes are strictly regulated by the Financial Conduct Authority (FCA). Requires registration, authorization and ongoing compliance by approved managers.
Staking, in contrast, allows blockchain users to lock native tokens to validate transactions, earning additional tokens as a reward. Treasury’s clarification reflects industry feedback that staking should not be treated as a CIS due to its operational differences.
This was stated by the economic minister of the Treasury, Tulip Siddiq position at a conference in November. He said: “It makes no sense for staking services to receive this treatment.”
Furthermore, the amendment is in line with the government’s commitment to remove legal uncertainties related to cryptocurrency staking.
This change is part of Treasury’s broader initiative to establish a comprehensive regulatory framework for cryptocurrencies by early 2025. The next framework is expected to cover staking services, stablecoins and other aspects of the crypto ecosystem.
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The UK FCA rejects 90% of crypto firms they seek Registration
As reported, almost 90% of cryptocurrency companies have applied for registration in the UK within the last year were rejected by the FCA.
The high rejection rate comes from companies’ failure to comply with necessary standards, in particular in areas related to fraud prevention and anti-money laundering protocols. The FCA has revealed that only four of 35 cryptocurrency company applications submitted in the last 12 months have been approved.
The UK has increased regulatory scrutiny of the cryptocurrency sector, following several high-profile failures last year. Last year, the FCA introduced new regulations requiring all cryptocurrency companies 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 national law. The proposed property law seeks to define these digital assets as “personal property” and create a specific legal category for them.
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