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Staking Regulation Best Practices: An Overview by Alison Mangiero, Executive Director of POSA
March 18, 2023
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Key Takeaways

  • Alison Mangiero of POSA provides an overview of staking and its importance for the security and maintenance of blockchain networks, emphasizing that staking should not be considered an investment scheme or subject to securities regulations.
  • The regulatory landscape for staking is complex, needing a clear differentiation between staking, lending, and other financial products to facilitate appropriate regulatory treatment.
  • POSA established the Staking as a Service Industry Principles in 2019, providing guidelines for industry participants to maintain focus on network security and avoid regulatory scrutiny. The principles include using non-financial terminology, focusing on security and network participation, and not providing guarantees on rewards earned.
  • Liquid Staking Tokens (LSTs) should be accurately described and differentiated from derivatives (LSDs) to ensure clarity and avoid regulatory confusion. LSTs should not be considered investment contracts, notes, or securities under U.S. federal securities laws, nor should they be considered swaps under commodity law.
  • Accurate terminology and clear communication are crucial when discussing staking and related services, making it easier for regulators and lawmakers to understand the technology and its importance in blockchain networks.
  • Ongoing regulatory developments may include potential banking packages addressing stablecoin and custody regulations and additional enforcement actions targeting custodial staking arrangements.

  • The industry should prioritize educating regulators and lawmakers on the differences between staking, lending, and other financial products to facilitate appropriate regulatory treatment and promote a healthy regulatory environment.

In a recent panel discussion during the Staking Rewards Institutional Ethereum Staking Forum, Alison Mangiero, Executive Director of the Proof of Stake Alliance (POSA), delivered a comprehensive presentation on staking regulation in the blockchain industry. In her talk, Alison discusses the legal and regulatory landscape surrounding staking, various staking models, and how these regulations can impact the industry.

 

           

 

Understanding the Four Staking Models

Alison outlines four distinct staking models that exist within the blockchain space:

  1. Protocol staking: Users deposit ETH into a smart contract, run Ethereum software, and receive rewards directly from the protocol.
  2. Custodial staking: Users enter an agreement with a service provider to stake ETH using the provider’s infrastructure. The provider takes custody of the ETH.
  3. Delegated self-custodial Software as a Service (SaaS) staking: Users maintain control and ownership of their ETH while using professional software to stake. Custody of tokens is never relinquished.
  4. Smart contract-facilitated liquid staking: Users deposit ETH into a smart contract, which spins up a validator when it receives 32 ETH in total.

Staking is not an Investment Scheme

Alison emphasizes that staking should not be considered an investment scheme, as it is crucial for maintaining and securing blockchain networks. Validators provide technical services, not financial services. Thus, staking should not be viewed as an investment contract or security.

Staking as a Service Industry Principles

In 2019, POSA developed a set of Staking as a Service Industry Principles, which still hold relevance today:

  1. Use non-financial terminology when discussing staking.
  2. Focus on security and network participation.
  3. Do not provide guarantees on the amount of rewards earned.

Alison explains that these principles aim to help the industry provide a clear understanding of staking and its importance in blockchain networks.

Liquid Staking Tokens vs. Derivatives

A working group was formed to analyze liquid staking tokens (LSTs) under US law, concluding that LSTs for digital commodities should not be considered investment contracts, notes, or securities. They should also not be treated as swaps under commodity law. Alison stresses the importance of accurate terminology, advocating for using “liquid staking tokens” instead of the commonly misused term “liquid staking derivatives.”

Liquid Staking Principles

The working group also developed a set of liquid staking principles, which include:

  1. Using appropriate terminology to describe tokens (LSTs vs. LSDs).
  2. Focusing on increasing liquidity without sacrificing the importance of staking for security and network participation.
  3. Developing tools that enable direct staking with access to liquidity.
  4. Refraining from providing investment advice.

These principles aim to guide the industry in developing and offering liquid staking products without crossing regulatory boundaries.

Possible Regulatory Developments

Alison shares her thoughts on possible regulatory developments in the near future, such as a potential banking package that could include stablecoin and custody regulations. She also anticipates additional enforcement actions, although the specifics remain uncertain.

“I think there will be bills introduced in Congress. I think the likelihood of them passing is not likely in the coming months. But there will be some action from people trying to introduce sensible regulations.”

Alison Mangiero

Importance of Accurate Descriptions and Terminology

Alison concludes her talk with a call to the industry to use accurate descriptions and terminology when discussing staking and related activities. She believes that doing so will make engaging with regulators and lawmakers easier while explaining the importance of staking in blockchain networks.

“We should be cautious about the words that we use, the way that we’re describing the activities that we engage in, and also explain why it’s essential for the functioning of these networks.”

Alison Mangiero

Final Thoughts

Alison Mangiero of POSA highlights the importance of staking in the blockchain ecosystem and the need for a clear and accurate understanding of its role in maintaining network security. By following established industry principles and promoting accurate terminology, stakeholders can work together to create a favorable regulatory environment that fosters innovation and growth in the blockchain and staking sectors. As the industry evolves and regulatory landscapes change, education and open communication with regulators and lawmakers will be essential in ensuring that staking and related services are treated fairly and appropriately under existing and future regulations. For future conversations like this, check out our Staking Summit 2023.

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Is Microstrategy (the company represented by the $MSTR stock) vulnerable to this kind of pressure? The evidence suggests yes.

A substantial stake held by Blackrock grants them effective leverage to influence and manipulate the company itself.

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The fundamental operational model of this corporate champion works like a closed loop:

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New Human Force
Join this Now! YOU have what it takes!

They are in our solar system, and in our event-stream in this Eternal Now.

Officialdom is clueless.

They think we are going to be at WAR with the Aliens.

Officialdom is very stupid.

Aliens is here. It’s not WAR. It’s Contention.

There is a difference.

Officialdom is clueless, still living in the last Millennium.

Aliens is here.

The Field in which we contend is This Eternal Now.

ALL HUMANS LIVE HERE, and ONLY HERE, in this

ETERNAL NOW.

It’s a Field of potentials, of pending Manifestation, this continuous event-stream of karma in which we have always lived our body’s Life.

This Eternal Now has always been our body’s Field of Contention.

The Aliens is here, in our Eternal Now.

Our common, shared, reality that we all continuously co-create now has Aliens.

It’s getting very complex in here.

Officialdom is clueless. They see the Aliens. They are freaking out. They think you are children, when it is their small minds, trapped in a reality that is only grit, mud, and ‘random chance’ who are childish.

Officialdom is stupid. They will and are reacting badly. As is their way, they are trying to hide shit from you. Silly grit bound minds don’t realize you can see everything from within the Eternal Now. They have yet to grasp that what they perceive as this Matterium, filled with ‘matter’, is but a hardening of our previous (past) internal states of being.

WAR happens in the Matterium.

Contention occurs within this Eternal Now where Consciousness shapes the manifesting event-stream.

YOU know this to be fact. You are a co-creator.

Contention with Aliens is happening in this instant in this Eternal Now.

Officialdom ain’t doing shit. They are still stuck in trying to move matter around to affect unfolding circumstances. That’s redoing the mirror trying to affect the reflection. Dumb fucks….

It’s up to US. To the New Humans. Those of us who live in this Eternal Now. Those of us who see that our body’s Lives (the Chain that cannot be broken) are expressions of the Ontology revealing itself to itself. It’s up to us guys.

We are not an Army. That’s a concept from the past, from before the emergence of the New Humans. We are a Force. A self-organizing collective with leadership resident in each, and every participant.

We are the New Human Force. By the time officialdom starts to speak about the Aliens in near-factual terms, we will already be engaging them in this Eternal Now.

By the time officialdom begins to move matter around (space ships & such) thinking it’s War, we will already be suffering casualties in this Eternal Now. That part is inevitable. It’s how we learn.

By the time officialdom realizes that some shit is going on in places and ways beyond its conception, we will already be pushing our dominance onto our partners in this First Contention, the Aliens. Nage cannot train without Uke.

Just as officialdom is scrambling to research the Ontology, this Eternal Now, and the event-stream, we will be settling terms with our new partners, the Aliens.

Come, join with us. It’s going to be a hellacious Contention.

We ARE the NEW HUMANS!

Together we are the Force that cannot be defeated.

Start YOUR training in this instance of this Eternal NOW.

Consume Neville Goddard videos as though all of human existence depended on YOUR mind and YOUR active, effective, imaginings!

It’s not a question of Mind over Matter as there is only Mind and it cares not for Matter. That’s residue.

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