Cryptocurrency is now a firm fixture in the financial sector since its arrival approximately 16 years ago.It has undergone periods of growth and retraction and its volatility is recognised.The system does not have a central authority and regulation has been cautious. The Treasury announced that the government had commissioned a study of cryptocurrencies and whether there was a role for cryptocurrency in the British economy in 2014. The study was also to consider the question of regulation.The final report was published in 2018 and a consultation on cryptocurrency and stablecoins was issued in 2021.
Whilst the regulation of cryptocurrency assets is still being formulated, The Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order came into effect in January 2025 with the objective of clarifying that the arrangements for staking of qualifying crypto-assets do not comprise of a collective investment scheme under Section 235 of the Financial and Markets Act 2000.
Demetri Bezaintes, an associate in the banking and financial fraud litigation department, commented "legal clarity on this point is welcome. Thedefinition of a collective investment scheme includes any procedure governing the management of property, which can be any type of asset or something of any description, that enables participants in the scheme to receive profits or income arising from the acquisition, retaining, management or disposal of the property. The Order clarifies that staking crypto-assets does not amount to a collective investment scheme "...New paragraph 22 clarifies that arrangements for qualifying cryptoasset staking do not amount to a collective investment scheme. Staking is a consensus mechanism used by "proof of stake" blockchains...." Demetri further commented "staked crypto-assets can derive income, however, usually in the form of additional crypto-assets, based on the amount they stake and the blockchain network rules.It must be remembered that crypto-assets will always retain their volatility and susceptibility to fraud"
Cryptocurrency Staking
- Staking is a way to earn passive income by taking part in validation transactions on a blockchain network."Staking" your cryptocurrency means locking it in a wallet or a staking platform.
- The act of staking coins then helps to secure the network and validate transactions.
- The rewards earned are typically more of the same cryptocurrency.
- There may be a "lock-up" period that prevents you accessing your cryptocurrency and rewards until the lock-up period has expired.
The control and regulation of crypto-assets will continue to evolve and no doubt The Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order will not be the last piece of regulatory on this complex area of finance.It should be remembered that, whilst staking is growing in popularity, there is an inherent risk.If you are considering staking your crypto assets it is wise to enlist the assistance of a lawyer conversant with the regulatory framework.
Demetri Bezaintes is an associate based in the London office within the Financial Services and Crypto Litigation Department. He is an SRA-regulated Registered Foreign Lawyer (RFL) in England & Wales and a qualified Greek Lawyer (dikigoros).
Demetri has a thorough knowledge of investment fraud and fund tracing. He works tenaciously for our clients, advising on cryptocurrency, Forex trading disputes and regulatory investigations. He draws his expertise in investment law from his experience in the banking sector and his experience in banking and financial services regulation. Prior to joining Giambrone & Partners Demetri worked at an international bank, where his main focus was the enforcement of freezing orders and third-party debt orders.
He approaches cross-border jurisdiction matters with a comprehensive view, based on his knowledge of both civil and common law. After qualifying as a lawyer in Greece, he obtained a Graduate Diploma in Law from the University of Westminster.
Demetri also has experience of assisting high net worth individuals (HNWI) with real estate transactions arising from the Golden Visa schemes. He was invited to speak at a prestigious global conference
Notable Cases
Tippawan Boonyaem v Persons Unknown Category A & Ors [2023] ewhc 3180 (Comm)
The High Court granted the first UK Summary Judgment to a foreign based victim against fraudsters in multi-jurisdictional cryptocurrency investment scam.
Mannarino v Person Unknown & Ors [2023]
The High Court granted the first default Judgment in a claim relating to cryptocurrency fraud on behalf of the foreign Claimant demonstrating that the English Courts will act to protect foreign victims of fraud where there is sufficient connection to England and Wales.
D'Aloia v Person Unknown & Ors [2022] EWHC 1723 (Ch) (24 June 2022)
The High Court granted an order permitting service of proceedings on persons unknown via a non-fungible token (NFT) via the blockchain. This is the first instance of an English court allowing service by means of distributed ledger technology and paves the way for victims of crypto-asset fraud to use novel technology to bring claims against persons unknown.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
