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Breaking News! UK amends law to clarify that encryptioncoin stake is not subject to regulation under the Collective Investment Scheme Act.
The UK Treasury recently revised a law to clarify that Cryptocurrency stake is not classified as a 'collective investment scheme', which is usually heavily regulated. The industry believes that this is a key step in providing legal clarity for Proof of Stake (PoS) blockchains such as Ethereum and Solana.
On January 8, the UK Treasury issued an order amending part of the Financial Services and Markets Act 2000 regarding collective investment, stating that 'Qualified Crypto Assets stake arrangements do not constitute a Collective Investment Scheme (CIS).'
This amendment clarifies that 'compliant encryption asset stake' refers to the activity of transaction verification on the blockchain, distributed ledger technology, or similar technologies.
The amended law will take effect on January 31.
Bill Hughes, ConsenSys' Lawyer and Global Regulatory Affairs Director, posted on community platform X on January 9th, saying:
This is an exciting development, as the management and promotion of collective investment schemes are subject to strict regulation. The way blockchain operates is not an investment scheme, it is a core network security mechanism.
Good news frens. It looks like that, by the end of the month, proof of stake mechanisms underlying certain blockchains (e.g. #Ethereum #Solana) will not be considered collective investment schemes under UK law. This is a good development because the management and promotion of… pic.twitter.com/JJgEO5rmPP
— Bill Hughes : wchughes.eth (@BillHughesDC) January 9, 2025
In the UK, 'collective investment scheme' refers to a way that allows participants to obtain profits or income, and such arrangements can include ETFs and investment funds.
These collective investment schemes are heavily regulated by the UK Financial Conduct Authority (FCA), and require registered and authorized managers to obtain institutional approval and commit to ongoing compliance.
In the Cryptocurrency field, stake is a process that allows users of blockchains such as Ethereum and Solana to lock up their native tokens and use them to validate on-chain transactions, thereby earning additional tokens as rewards.
The UK Treasury is issuing this order, apparently fulfilling a commitment made last November, when a draft cryptocurrency regulatory framework was slated for completion in early 2025.
UK Treasury Economic Secretary Tulip Siddiq said at a conference in London last November that these regulatory requirements will cover stake services, stablecoins, and Crypto Assets.
The UK's Cryptocurrency industry has once advocated that stake should not be designated as a collective investment, on the grounds that regulatory approaches should be different. Tulip Siddiq agrees with this point. She said:
To me, the treatment of stake services like this is unfair. The government intends to accordingly promote the removal of this legal uncertainty.
〈Breaking news! UK legislation clarifies that encryption tokens and stake are not subject to regulation under the 'Collective Investment Scheme' law.〉This article was first published on 'Block Client'.