The UK has introduced the Staking Order, effective January 31, 2025, a regulation aimed at providing clarity on how certain cryptocurrency activities are treated under the law. These activities continue to diversify, encompassing areas such as blockchain-based finance, digital asset management, and entertainment platforms like crypto casinos, which operate as online platforms where users deposit, wager, and withdraw in cryptocurrencies like Bitcoin. Unlike traditional casinos that rely on debit cards or bank transfers, these platforms allow direct transactions via cryptocurrency wallets. (Source: https://bitedge.com/crypto-casinos/)
With the introduction of the Staking Order, the UK seeks to establish a balanced regulatory environment that supports growth in the cryptocurrency space while addressing compliance requirements.
The Issue: Collective Investment Scheme Rules
The UK’s Financial Services and Markets Act (FSMA) broadly defines the Collective Investment Scheme (CIS) as any arrangement in which participants pool their assets to generate returns from managed investments. Entities operating a CIS must obtain FCA authorization and are restricted to marketing their products to specific types of investors, such as professionals or sophisticated individuals.
This broad definition caused confusion when applied to decentralized blockchain networks, where operators often aggregate user holdings to meet technical requirements. These practices bore similarities to CIS arrangements, creating a gray area that deterred providers from operating confidently in the UK.
The Solution: The Staking Order
The HM Treasury (HMT) resolved this ambiguity by amending the FSMA (CIS) Order 2001 to explicitly exclude QCS arrangements. This exemption applies to activities conducted for blockchain validation, an essential function of proof-of-stake networks.
Blockchain validation involves using specific digital assets to confirm and secure transactions on a distributed ledger. Under the Order, these activities are not treated as CIS, provided the assets are fungible, transferable, and meet the criteria of a qualifying crypto asset (QCA). Regulated instruments, fiat currency, and restricted-use tokens remain excluded.
The government released an explanatory note clarifying how the law applies. For example, it addresses situations where businesses pool customer holdings to meet operational thresholds, often delegating technical operations to specialized service providers.
While these arrangements shared characteristics with traditional CIS models, they are now explicitly excluded from that framework. This change recognizes that imposing fund management rules on decentralized activities would hinder innovation and create unnecessary barriers.
Regulatory Context: Clarification, Not Deregulation
While the Staking Order removes certain activities from CIS oversight, it does not provide a blanket exemption from all regulation. Providers must still assess whether their activities—such as promoting or selling digital assets—are subject to other UK financial laws, including financial promotion rules.
Looking ahead, this law is part of a broader effort to reshape the UK’s approach to digital assets. By 2026, the government plans to finalize a new crypto-asset framework. This will likely include requirements for ownership transparency, risk management, and user protections, ensuring accountability while supporting innovation.
Implications for the UK Crypto Sector
The Staking Order is an essential step for the UK’s digital economy. It addresses regulatory uncertainty, enabling businesses to operate with greater clarity and confidence. This is expected to attract more investment and encourage innovation in the blockchain space.
The decision aligns with the UK’s long-term strategy to position itself as a leader in digital finance. By addressing regulatory barriers without overburdening the industry, the government is paving the way for sustainable growth in this rapidly evolving sector.
Conclusion
The introduction of the Order represents a meaningful step forward for the UK’s crypto industry. By removing certain activities from the scope of collective investment scheme rules, the government has created an environment that encourages participation and innovation.
As the UK develops its broader regulatory framework, maintaining a careful balance between oversight and growth will be essential. This early effort demonstrates a clear commitment to fostering a dynamic, responsible digital economy.