CVA's Regulatory Working Group releases its latest publication:

Paper on Staking Services on Proof-of-Stake Protocols

The Swiss crypto industry is currently at a pivotal juncture regarding the regulatory treatment of crypto staking. This process enables crypto holders to support the operational functionality of blockchain networks and, in return for providing validation services with correct and system-compliant behavior, to receive a reward.

Within this context, there is a central concern of CVA based on various feedback from the crypto industry about FINMA’s proposition that entities offering staking services may require a banking license because staked assets shall not be deemed to be kept available for clients at all times in view of the slashing risk and the unstaking period.

The primary aim of this paper from the CVA on behalf of the crypto industry is to demonstrate, by looking at the technological design of staking structures and networks as well as further potential specific technical measures, that many custodial staking services are not in scope of the Banking Act and therefore do not need a banking license, and thus do not trigger the prohibitive capital adequacy requirements. The main argument hinges on the fact that, in most staking agreements, the holders of staked crypto assets or their custodians maintain the direct power over their staked assets at all times; however, this depends strongly on the technological design of the specific staking service.

This paper will show technological designs and technical measures that ensure this control, arguing against the need for a banking license for staking services for most staking arrangements.

DOWNLOAD THE PAPER HERE

We thank the following members of the CVA Regulatory Working Group, who have contributed to this paper: 

Fabio Andreotti, Julien Binder, Dominik Hofmann, Katharina Lasota Heller, Dongliang Liang, Reto Luthiger, Christine McAteer, Timea Nagy, Alexander Smith, Joshua Taucher