Staking protocols are subject to evolving and varying regulations, so be prepared to monitor and meet new legal requirements.
As even late-night talk show hosts begin to weigh in on events in the crypto industry, it’s clear the public is increasingly paying attention to both the potential and challenges of investing in crypto. Of even more immediate concern to crypto companies, though, are the questions around the type and number of legislative guardrails lawmakers will inevitably impose.
As regulators start to eye staking protocols, companies must ensure they engage in the ongoing work of ensuring that their staking is compliant. Below, 11 members of Cointelegraph Innovation Circle discuss effective ways for companies to ensure compliant staking as the industry continues to evolve.
Take a multilayered approach
Companies can ensure compliant staking by conducting due diligence on the associated risks, establishing governance structures, monitoring activities, implementing transparent reporting and engaging with regulators while seeking legal advice. – Erki Koldits, OÜ Popspot
Properly disclose risks and procedures
Recent crackdowns on crypto staking have largely centered around vague service language and poorly documented processes. That’s why risks and procedures should be properly disclosed to ensure users have the information they need to make an informed decision. As such, leaders must be transparent about how staking works on their platforms so it can remain a viable pathway for their communities. – Oleksandr Lutskevych, CEX.IO
Consult a lawyer with industry knowledge
The safest way to remain compliant is to consult a crypto-focused and/or securities-focused lawyer in the area in which the project is operating. Regulations can change quickly, and there are nuances that a professional would both be aware of and know how to best navigate. – Anthony Georgiades, Pastel Network
Be aware of the varying regulations covering different jurisdictions
Companies should be aware different jurisdictions will have different compliance rules. Also, staking protocols are not the only legal basis for staking; therefore, your legal team must watch any announcements and changes to the regulations in each jurisdiction. – Sheraz Ahmed, STORM Partners
Proactively engage with regulators and legal advisers
Companies must proactively engage with regulators and legal advisers for crypto staking compliance. For example, firms providing Ether (ETH) staking can collaborate with legal experts to assess processes and address regulatory concerns. Staying updated on regulations and seeking guidance on protocol structure helps minimize legal risks and maintain compliance. – Tomer Warschauer Nuni, Kryptomon
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Don’t proceed with staking until you’re sure about compliance
Do not take the approach of “it’s better to ask for forgiveness than permission.” This platitude does not work on regulators. If you can’t figure out a way to navigate the regulatory hurdles, keep asking around — don’t just shrug your shoulders and offer staking to your customers if you can’t make it compliant first. – Jae Yang, Tacen
Stay on top of SEC bulletins
Keep track of SEC bulletins on staking that gives stakers a percentage return in exchange for keeping their tokens with your company. Ensure that you are compliant with SEC requirements at all times. Take note, though, that DEX staking is probably better at this time since the client has custody of the tokens in their digital wallet. – Zain Jaffer, Zain Ventures
Register with the SEC if offering staking in the U.S.
Given Kraken’s $30 million settlement with the SEC in February 2023, companies offering staking to U.S. consumers must register with the SEC. They also need to properly disclose how consumers’ crypto will be used by keeping everything on the chain. Ultimately, offering staking to consumers outside the U.S. seems to come with fewer complications. – Arvin Khamseh, SOLDOUT NFTs
Avoid off-chain staking
Using intermediaries to move around staked funds undermines the transparency of your business and opens up a range of additional legal hurdles. Whether you are a delegator or a staking provider, keeping everything on the blockchain is the best way to protect both you and your customers. – Wolfgang Rückerl, ENT Technologies AG
Ensure you understand the nuances of securities laws
The SEC has never claimed that staking per se is problematic; pooling and offering the resulting pool is a security, which requires compliance with securities laws. On a case-by-case basis, if you are happy with staking a given project, then by all means, stake! If you are a staking intermediary, you must pay close attention to regulatory compliance in the applicable jurisdiction(s). – Timothy Enneking, Digital Capital Management
Realize that regulations will continue to evolve
Companies have to stay informed of regulatory developments and adjust their staking methods accordingly to maintain ongoing compliance. Businesses should monitor the regulatory authorities that oversee the jurisdiction in which their staking process is implemented to stay up to date on any new regulations or revisions to existing ones. – Theo Sastre-Garau, NFTevening
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.
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