UK Eases Restrictions on Crypto Staking with New Legal Amendment

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The British government has adjusted its monetary guidelines, now excluding cryptocurrency staking from the purview of “Collective Investment Schemes” (CIS). These schemes typically fall under stringent supervision.

The new guidelines issued by the Treasury offer a clear legal perspective when it comes to participating in staking activities, particularly on decentralized platforms such as Ethereum and Solana that operate under a proof-of-stake consensus mechanism.

Crypto Staking Has a New Legal Precedent in the UK

The new regulation, effective from January 8th, alters the Financial Services and Markets Act 2000. According to this change, setups related to “qualifying crypto asset staking” are no longer considered Collective Investment Schemes (CIS).

This term is about employing network systems based on blockchain technology (or comparable tech) to verify transactions. The updated legislation is set to be implemented on January 31, 2025.

As a crypto investor residing in the UK, I’ve come to understand that a Collective Investment Scheme (CIS) refers to any pooled investment structure where contributors share returns or earnings. This could encompass Exchange-Traded Funds (ETFs) and mutual funds, among others.

Under the current system, these practices are closely monitored by the Financial Conduct Authority (FCA). This involves registering, obtaining authorization, and maintaining ongoing compliance under the supervision of approved managers. A recent change in regulations aims to exclude staking activities from this rigorous regulatory structure.

As a researcher, I am anticipating the release of regulatory guidelines for cryptocurrency activities such as staking services, stablecoins, and others, which aligns with the broader plans of the UK Treasury to govern this sector. Economic Secretary Tulip Siddiq announced in November 2024 that these draft regulations would be prepared by early 2025.

Additionally, it’s anticipated that the comprehensive regulatory structure, encompassing guidelines for cryptocurrency exchanges and lending services, will be established by the beginning of Q1, 2026.

Ongoing Challenges for the FCA

Regardless of recent advancements, the Financial Conduct Authority (FCA) persistently encounters obstacles in their mission to ensure adherence to regulations within the cryptocurrency sector.

2024 saw the agency handling 1,702 petitions to take down unlawful cryptocurrency promotions, however, just 54% of these led to action being taken. So far, the Financial Conduct Authority (FCA) has not imposed penalties on non-compliant firms, which has sparked debate about the efficiency of its regulatory actions.

Also, the UK saw several notable crypto-related controversies in 2024. 

On TikTok, there were concerns raised by the Financial Conduct Authority (FCA) about potential operations of an unlicensed cryptocurrency exchange via their virtual coin system. Experts in compliance suggested this setup might facilitate unmonitored financial transactions.

Furthermore, following advisories from the Financial Conduct Authority (FCA), the meme coin platform operating on the Solana network, known as Pump.fun, prohibited access for users residing in the United Kingdom.

The action taken by the Treasury to fill regulatory loophanes shows the government’s aim to strike a balance between encouraging innovation in the cryptocurrency field and ensuring the safety of investors, given the ongoing expansion of this sector.

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2025-01-11 01:23