Europe’s Crypto Industry Wants Staking Clarity as Regulations Loom

Crypto staking has so far escaped specific regulation in Europe – but many in the industry wonder if it’s helpful to maintain a regulatory gray area.

There’s a dilemma for the sector here. Setting detailed rules for the still-developing staking sector could prove premature. But recent moves in Singapore and Switzerland show the risk of keeping a legal vacuum, into which regulators may rush to impose heavy-handed restrictions.

This article is part of CoinDesk’s “Staking Week.”

The European Union’s Markets in Crypto Assets law (MiCA) makes the bloc the world’s first major jurisdiction with a more or less comprehensive crypto law, covering everything from stablecoin issuance to insider trading – but even MiCA leaves staking out.

That’s a gap that needs to be fixed, says the European Central Bank’s Christine Lagarde, who’s called for the service – in which crypto holders can post their assets to earn passive income –  to be addressed in a MiCA sequel. That would likely take years, if it happens at all – and some are worried about what will happen in the meantime.

Tom Duff Gordon, Vice President International Policy at Coinbase, sees staking as so fundamental to the crypto ecosystem that it needs to be nailed down – and says the lack of any attempt to do so is a major gap in MiCA.

“Just describing what that [staking] is, I think, would be helpful,” Gordon, the exchange’s Vice President for International Policy, told a Tuesday event hosted by the Blockchain for Europe lobby group.

The problems of a legal lacuna can be seen in Switzerland. In a Sept. 7 press release, the Swiss Blockchain Federation warned of a “change in practice” by financial regulators at Finma, under which only licensed banks can offer staking – something the lobby group said could limit the country’s innovation and competitiveness.

For its part, Finma has told CoinDesk that it continues to follow “clear and precise” blockchain laws dating from 2021 that “leave no room for discretion in implementation.” In some versions of staking, bankruptcy could put client assets at risk, calling for a tougher, bank-style approach, regulators argue.

In other words, the lack of specific, MiCA-style rules has thrown the industry into uncertainty. Authorities have, in effect, forced staking…