Source: FinTax
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The UK Treasury has amended the Financial Services and Markets Act (FSMA), which came into effect on January 31. The amendment excludes cryptocurrency staking from collective investment schemes. According to this change, staking cryptocurrencies such as Ethereum (ETH) and Solana (SOL) will only be regarded as a blockchain verification process and will no longer be subject to regulatory requirements applicable to collective investment schemes. Previously, due to vague regulatory definitions, staking was at risk of being classified as a traditional collective investment scheme, and these investment vehicles were subject to stricter FSMA regulations.
FinTax Comment:
FSMA is one of the most important financial regulatory regulations in the UK, and it will begin to regulate cryptocurrency staking as a collective investment scheme (CIS) in early 2023. A collective investment scheme is a financial arrangement that pools funds from multiple investors, operates under a unified investment plan by a professional management team, and investors share profits or risks according to their shares. The behavior of pledging cryptocurrencies is similar to that of a collective investment scheme in form, which makes the UK recognize it as a collective investment scheme. This revision means that the pledging activities of cryptocurrencies represented by ETH and SOL will no longer need to meet the strict regulatory requirements of collective investment schemes. Specifically, the amendment clearly points out that pledging activities are essentially different from collective investment schemes, because the blockchain verification process involved in pledging mainly refers to the pledging participants verifying transactions on the blockchain by locking cryptocurrencies to ensure the security of the network, which is fundamentally different from the nature of the fund pool and the investment return mechanism involved in traditional collective investment schemes.
According to FSMA regulations, CIS needs to meet strict standards from establishment to operation. For example, the management company should have sound capital and financial capabilities, disclose investment details in a timely and transparent manner, and implement customer due diligence (CDD). Therefore, if cryptocurrency pledge is excluded from CIS, the compliance cost of the cryptocurrency pledge ecosystem will be reduced, thereby promoting the prosperity and development of cryptocurrency pledge in the UK. Of course, this will objectively reduce the protection of British cryptocurrency investors and increase their risk of investment losses. However, from the perspective of balancing regulation and innovation, the concessions made by the British regulatory authorities in this revision are more about leaving room for innovation and development for the country's crypto industry, which is beneficial to the long-term interests of the crypto industry.
From a global perspective, the field of cryptocurrency pledge has always been a regulatory hotspot in various countries. For example, in the EU, MiCA includes free cryptocurrencies in the scope of jurisdictional exemptions, but projects that require users to spend a lot of Gas to interact and require cryptocurrency pledges are excluded from the exemptions. Japan and Australia conduct specific analysis of cryptocurrency pledge behavior. If the pledge income belongs to the income of financial products, then the pledge behavior also needs to comply with relevant financial regulations. Singapore explicitly prohibits the provision of cryptocurrency lending and pledge services to individual investors.
In short, the regulation of cryptocurrency pledge is an important issue that governments must face, but different countries hold different attitudes towards it. The significance of the UK's revision of FSMA lies not only in that it further clarifies the supervision of staking activities, but also in that it shows the UK's strategic position in the global cryptocurrency field: to maintain flexibility in supervision, to gradually relax restrictions cautiously, and to avoid overly stringent rules that constrain the development of the industry. This change is expected to attract more blockchain projects and crypto companies to enter the UK market and help the UK seize the initiative in global crypto financial innovation.
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