UK Updates Law to Exempt Crypto Staking from Strict Rules

The UK government has revised its financial regulations to exempt crypto staking from the scope of “collective investment schemes” (CIS), which are subject to strict oversight. 

The Treasury’s updated framework provides legal clarity for staking on proof-of-stake blockchains like Ethereum and Solana.

Crypto Staking Has a New Legal Precedent in the UK

A new order issued on January 8 modifies the Financial Services and Markets Act 2000. It specifies that arrangements involving “qualifying crypto asset staking” do not constitute a CIS. 

This term refers to using blockchain-based networks or similar technologies to validate transactions. The amended regulation will take effect on January 31, 2025.

Under UK law, a CIS includes any group investment arrangement where participants share profits or income, such as ETFs or mutual funds. 

These schemes are heavily regulated by the Financial Conduct Authority (FCA), requiring registration, authorization, and ongoing compliance by approved managers. The new amendment ensures that staking activities fall outside this stringent framework.

The order aligns with the UK Treasury’s broader plans to regulate cryptocurrency. In November 2024, Economic Secretary Tulip Siddiq announced that draft regulations covering crypto staking services, stablecoins, and other crypto activities would be ready by early 2025. 

Also, the final regulatory framework, including rules for trading platforms and crypto lending, is expected by the first quarter of 2026.

Ongoing Challenges for the FCA

Despite recent developments, the FCA continues to face hurdles in its efforts to enforce compliance within the crypto industry. 

In 2024, the agency received 1,702 requests to remove illegal crypto advertisements, but only 54% resulted in action. The FCA has yet to impose penalties on firms that fail to comply, raising concerns about the effectiveness of its enforcement measures.

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

TikTok faced scrutiny from the FCA for allegedly running an unregistered crypto exchange through its virtual coin system, which compliance experts argued could enable unregulated financial transactions. 

Additionally, the Solana-based meme coin platform Pump.fun banned UK users after warnings from the FCA.

The Treasury’s move to address regulatory gaps reflects the government’s intent to balance innovation with investor protection as the crypto sector continues to grow.