Staking is a practice which consists, for a crypto holder, of blocking part of their assets in a wallet or in the smart contract of a given blockchain. The objective being to support the operations of the blockchain network in question to earn, in return, passive income. In Switzerland, this service is offered by both service providers and banks. But the Swiss financial regulator intends to only authorize this service to banks.
In short
- FINMA plans to restrict staking to authorized banks.
- Swiss crypto organizations SBF and CVA criticize this approach, deeming it wrong and harmful to the industry.
- The SBF and the CVA warn of the risk of loss of competitiveness and call for transparent regulation.
Swiss financial regulator threatens the practice of crypto staking
The Swiss Blockchain Federation (SBF) and the Crypto Valley Association (CVA) have stepped up against the Swiss Financial Market Supervisory Authority (FINMA). In a joint statement, these two umbrella organizations of the Swiss crypto industry criticize the regulator’s desire to make the practice of crypto staking conditional on authorization.
According to FINMA’s plans, only banks will be able to offer crypto staking services in the future. A possibility which automatically excludes service providers, but which the Swiss financial regulator justifies for certain reasons.
FINMA’s choice is linked to the fact that there would be a “risk of confiscation of participants’ cryptoassets in the event of false validation or other violation of the rules (slashing)”. The regulator also mentions “the temporary blocking of cryptoassets by staking protocols (lock-up)”.
All things which, according to him, make staking cryptos unavailable. Which, consequently, modifies their nature with regard to banking law. This, by making them pass from “secured securities” to that of “deposits from the public”. This latter qualification requires authorization as a bank to be valid.
The Swiss crypto industry is sounding the alarm
For the SBF and the CVA, this way of analyzing things is not relevant and would even be wrong. “Staking is in no way linked to processing services and is therefore not comparable to the lending activities of banks”indicate the two organizations.
They warn of the potential consequences that such an option could cause. One of them would be to annihilate the legal achievements resulting from the reform introduced by the legislation on distributed electronic register technology (TRD). A regulation, which notably “strengthened the protection of clients in the event of bankruptcy of depositaries”.
Furthermore, the SBF and the CVA are concerned about seeing non-bank institutions losing competitiveness. A situation that is likely to occur. Especially since FINMA’s decision would cause staking providers to flee to territories where their practice is relaxed.
For these reasons, the SBF and the CVA call on the Swiss financial regulator to “organize the regulatory process in a transparent manner”. This, by involving stakeholders. An approach that these organizations consider vital to guarantee the competitiveness and capacity for innovation of the Swiss crypto industry.
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