UK Treasury has made changes to its regulations regarding cryptocurrency by amending the Financial Services and Markets Act 2000 (FSMA). This amendment specifically excludes crypto staking from being categorized as part of collective investment schemes (CIS). The new rule will come into effect on January 31, 2025. This change reflects a shift in the UK’s understanding of how the blockchain validation process works and aims to provide transparency for the crypto community and businesses operating in the UK.
With the new amendment, staking cryptocurrencies like Ethereum (ETH) and Solana (SOL) will no longer be considered collective investment schemes. Staking involves securing tokens to participate in the validation of blockchain transactions and receiving rewards, which will now be classified as a blockchain validation process.
This amendment resolves the longstanding uncertainty around whether staking activities should be subject to the same strict regulations as conventional investment funds and exchange-traded funds (ETFs). The UK Treasury has also clarified that staking crypto assets, where participants lock their assets in anticipation of transaction validation, cannot be classified in the same regulatory tier as collective investment schemes.
It is important to note that staking will be subject to tighter regulatory control compared to investment funds, as the Financial Conduct Authority (FCA) maintains intensive oversight over investment funds.
Legal expert Bill Hughes from Consensys welcomes this adoption, emphasizing that blockchain functionality is not an investment scheme but an extension of cybersecurity.
Collective investment schemes, including ETFs and funds, are regulated by the FCA in the UK. Firms must register with the FCA and meet strict requirements before participating in these schemes. Approved regulators continuously monitor compliance to ensure standards are upheld.
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