Understanding the Updated Staking Principles by POSA
The Proof of Stake Alliance (POSA), a nonprofit organization representing firms in the crypto staking industry, recently released an updated version of its “staking principles” on November 9th. These principles aim to provide industry-driven solutions that address regulatory concerns and promote responsible practices within the staking industry.
POSA represents 15 different firms in the staking industry, including Alluvial, Ava Labs, Blockdaemon, Coinbase, Credibly Neutral, Figment, Infstones, Kiln, Lido Protocol, Luganodes, Methodic, Obol, Polychain, Paradigm, and Staking Rewards. The staking principles were initially published in 2020.
The previous version of the principles outlined several key guidelines for staking providers. They emphasized that staking providers should refrain from offering investment advice, guaranteeing specific staking rewards, or implying control over a protocol in their marketing materials. Instead, providers were encouraged to advertise their products as granting access to a protocol and enhancing security. Additionally, the principles emphasized the use of non-financial terminology, such as “staking reward,” in marketing materials, rather than financial terms like “interest.”
In the recent announcement, POSA introduced three new principles to further enhance responsible practices within the staking industry:
- Clear Communication: Staking providers should prioritize clear communication to ensure that users have all the necessary information to make informed decisions.
- User Ownership: Users should have the freedom to decide how much of their assets they want to stake, promoting a sense of ownership over their staked assets.
- Delineated Responsibilities: Staking providers should have explicitly defined responsibilities and should not manage or control liquidity for users.
The crypto staking industry has faced criticism from regulators who claim that it serves as a cover for issuing unregistered securities. In February, the United States Securities and Exchange Commission (SEC) ordered Kraken’s staking service to shut down and imposed a $30 million fine for allegedly violating securities laws. However, other staking providers, like POSA member Coinbase, have argued that their services are fundamentally different and do not violate securities laws.
The updated staking principles by POSA aim to address these concerns and foster responsible practices within the staking industry. By promoting clear communication, user ownership, and delineated responsibilities, staking providers can build trust and credibility in the market while ensuring compliance with regulatory requirements.