Industry advocate Proof of Stake Alliance opens dialogue with SEC on staking service regulations

The Proof of Stake Alliance (POSA), an advocacy organization for burgeoning staking landscape, has published a set of standards to address potential regulatory concerns surrounding Proof-of-Stake networks and related services. The group shared these industry recommendations with SEC back in Feb., as it aimed to open up a “productive dialog” with the government agency about staking. Now, POSA is publicly advocating staking services to adopt these standards, which ask providers to focus on the technological aspects of staking and avoid promoting it as a financial opportunity, to help push the discussion with policymakers forward.

The alliance consists of sixteen entities, including professional validators Polychain Labs and Bison Trails, PoS network foundations Web3 and Cardano, and Coinbase Custody. CoinDesk provided a high-level breakdown of the five standards shared with the SEC:

• Don’t provide investment advice to market participants
• Don’t call staking rewards “a profit opportunity”
• Focus advertising on network participation and security
• Don’t indicate the service provider has control over the inflation rate
• Don’t provide guarantees on staking rewards

Why it matters:

• PoS networks are expanding at a rapid rate, and with that, investor demand for the associated and staking rewards. POSA’s guidelines could help avoid a situation similar to 2017’s ICO craze, where the promotion of tokens as investment vehicles and subsequent scams (in most cases, rightfully) provoked the ire of the SEC.
• PoS is a relatively new (and therefore scary) model regulators still need to wrap their heads around. This lack of understanding could lead to quick judgments. For instance, CFTC chairman Heath Tarbert hinted last Fall that the CFTC is thinking about classifying PoS tokens as securities because, by his account, the validation process is not sufficiently decentralized. Therefore, POSA could provide regulators with some much-needed education on PoS while helping ease any regulatory concerns. But since specifics of PoS are more complicated and still in its early stages, the SEC or CFTC may not offer any clear guidance on staking anytime soon.

Let us know what you loved about the report, what may be missing, or share any other feedback by filling out this short form. All responses are subject to our Privacy Policy and Terms of Service.