The United Kingdom Treasury, the government department responsible for finance and economic policy, has amended Treasury laws to clarify that digital asset staking is not a collective investment scheme, allowing proof-of-stake (PoS) blockchains to avoid—for now— the more onerous regulatory requirements that come with that label.
In a January 8 orderthe Ministry of Finance changed part of it Financial Services and Markets Act 2000 (FSMA) related to group investments, adding that “arrangements for qualified contribution of crypto-assets do not amount to a collective investment scheme.”
It also clarified that “qualifying crypto-asset investment” means the use of a qualifying crypto-asset in blockchain validation … or other similar technology.”
In it blockchain’s context“staking” is a process by which holders of digital assets lock up a portion of their assets to help validate transactions and secure a blockchain network. Blockchains that use a proof-of-stake protocol, such as Ethereum and Solanaallows users to stake their native tokens in exchange for earning rewards, usually in the form of additional tokens.
There was previously some uncertainty in the UK as to whether such a protocol on proof of contribution could be classified as “collective investment schemes” and thus subject to the heavier regulatory requirements for this investment category.
The UK defines a “collective investment scheme” under FSMA as an arrangement that allows several investors to pool their funds, where participants do not have day-to-day control, and the scheme involves property managed as a whole, with profits or income shared between investors. This includes products such as exchange-traded funds (ETFs) and mutual funds.
Due to the perceived riskier nature of such products, they are subject to heavier regulation by the country’s financial sector watchdog, Financial Conduct Authority (FCA).
Specifically, the FCA requires collective investment schemes to be authorized or recognized before they are marketed to retail investors, mandates clear disclosure of investment risks and fees, and enforces strict operating and reporting standards to ensure investor protection and market integrity.
Wednesday’s clarification by the UK Treasury means that blockchain protocols are safe at stake and their users can breathe a sigh of relief, as they will not be required to meet these obligations—at least for now.
The updated law enters into force on January 31.
Strikers cheer
Reaction to this update was swift and positive from some interested industry players.
Bill Hughesa lawyer and global regulatory affairs director at Ethereum software development firm Consensyswelcomed the clarification as a step forward for the industry in the UK, stressing that the country’s laws traditionally regulate collective investment schemes with a heavy-handed approach that could have stifled growth.
“This is a good development as the management and promotion of CIS (collective investment schemes) are heavily regulated,” Hughes posted to X on January 9.
“The way a blockchain works is NOT an investment system. It’s cyber security,” he added.
The move is also in line with UK’s wider strategy to promote innovation in the digital asset sector while seeking to maintain appropriate consumer and investor protection oversight. It also signals, perhaps, the first steps towards a long-term drunk regulation of digital assets in the UK
UK progress towards digital assets framework
Last year, the UK government committed to having a draft digital asset regulation ready by early 2025.
Siddiq also noted the government’s intention to clarify the rules of the game, agreeing with local digital asset commentators who pushed for Stake not to be classified as a collective investment scheme.
“To me, it doesn’t make sense for staking services to have this treatment,” Siddiq said at the time. “The Government intends to proceed with removing this legal uncertainty accordingly.”
Having already acted on this part of his promise, it may not be long before the UK follows through on the rest of the Chancellor of the Exchequer’s promises on digital asset regulation.
In December 2024, the Swedish Competition Authority published a discussion material on the Future Market Abuse Regime for Crypto Assets (MARC) and the Digital Asset Recognition and Disclosure (A&D) Regime, which together is described as “vital to improving the integrity and purity of our crypto markets, as well as helping people make informed financial decisions.”
A key feature of the A&D regime is that public offerings of digital assets will be prohibited, with only two exceptions, either through a regulated digital asset exchange or by qualified investors. This would place the onus on exchanges to perform adequate due diligence on offerings and to have a process for rejecting listings for trading.
FCA too proposed that some companies, such as authorized digital asset trading platforms, “share information with each other to help stop suspected market abuse. This will reduce fraud and help promote good practice in the sector.”
The regulator said these proposals aimed to improve regulatory clarity so that there are clear and consistent “rules of the game” for businesses and consumers, as well as implementing controls and processes to achieve “fair and orderly” trading conditions and reduce risks of money laundering and fraud.
Currently, UK regulation of digital assets only extends to anti-money laundering (AML) and marketing rules. However, depending on feedback to FCA’s December discussion materialit seems the UK may soon be ready to unveil a more comprehensive conduct framework.
