Crypto Staking and Regulation: What FinTech Businesses Need to Know Before Offering Staking Services

Published by Yetunde Rotinwa on October 14, 2026October 14, 2026

Crypto staking is a regulatory challenge for crypto businesses.

What appears to be a straightforward way for customers to earn rewards on their digital assets can raise difficult questions about licensing, custody, asset ownership, consumer protection, and operational risk.

Regulators in several jurisdictions have scrutinised staking-related services, particularly where platforms pool customer assets, control the staking process, or promise customers rewards in exchange for depositing their crypto.

But staking is not one single activity. The underlying blockchain mechanics, the service offered by a platform, and the contractual relationship with customers all matter when determining the regulatory implications.

Let’s unpack it.

The Technical Background of Staking

Crypto users and service providers often describe staking as a way to earn rewards while holding crypto assets.

To understand why regulators have concerns, it helps to understand how staking works and what the service provider actually does.

Some cryptocurrencies, including Ether (ETH), Tezos, Cosmos, Solana, and Cardano, use a consensus mechanism known as Proof of Stake (PoS).

These networks rely on validators to help verify transactions, participate in consensus, and maintain the integrity of the blockchain.

Token holders can stake their assets to participate in this process, either by operating validator infrastructure themselves or by delegating their stake to a validator, depending on the protocol.

In return, participants may receive rewards under the network’s rules.

The assets committed to staking help support the network’s security. Protocol rules can also impose penalties on participants who fail to meet certain requirements or engage in prohibited behaviour.

Why Don’t All Blockchains Offer Staking?

Bitcoin does not use Proof of Stake. It relies on Proof of Work (PoW), a different consensus mechanism.

Under Proof of Work, miners use computing power to compete to add new blocks of transactions to the blockchain. The successful miner receives block rewards and transaction fees according to the network’s rules.

Proof of Stake takes a different approach. Validators are selected to propose or attest to blocks based on the protocol’s rules, which typically involve the amount of stake and other factors.

PoS does not require the same mining competition used by PoW networks, although validators still need appropriate infrastructure and operational safeguards.

The two mechanisms involve different technical and economic trade-offs. Neither eliminates the need to assess security, operational resilience, and the risks faced by participants.

Ethereum is a useful example of this distinction. The network moved from Proof of Work to Proof of Stake in September 2022. Ether can now be staked to participate in Ethereum’s consensus process.

What Happens When You Stake Crypto?

The process depends on the blockchain and the staking arrangement.

In some cases, a participant operates a validator directly. In others, the participant delegates assets to an existing validator.

Staking may involve a lock-up period, an unbonding period, or restrictions on when assets can be withdrawn or transferred.

Operating a validator also comes with technical responsibilities. The operator needs to maintain the required infrastructure, protect its keys, monitor performance, and ensure the validator follows the protocol’s rules.

Failure to do so can lead to penalties.

One example is slashing, where a protocol removes some of a validator’s stake for certain forms of misconduct or rule violations. Depending on the protocol and arrangement, delegated participants may also bear some of these losses.

Other operational failures may reduce rewards or affect a validator’s performance without necessarily triggering slashing.

Withdrawal arrangements also vary. Some networks impose an exit queue or other delays, which can become particularly relevant when many participants want to withdraw at the same time.

For customers, this means staking is not simply a matter of depositing crypto and collecting rewards. It involves technical, liquidity, and potentially financial risks.

The Rise of Staking-as-a-Service

Operating a validator can require technical expertise, infrastructure, continuous monitoring, and an understanding of the relevant blockchain protocol.

Many crypto users do not want to manage these responsibilities themselves.

The industry responded by developing staking-as-a-service arrangements.

Crypto exchanges, custodians, and specialist providers can offer customers access to staking without requiring them to operate their own validator infrastructure.

Depending on the service, a provider may operate validators, arrange delegation, pool customer assets, manage withdrawal requests, or distribute rewards.

This creates an important distinction between the underlying blockchain activity and the service offered to customers.

A person staking assets directly through a protocol may have a different relationship with the network from a customer who deposits assets with a centralised platform that controls the keys and manages the entire process.

The technical activity may be similar, but the legal and regulatory questions can be very different.

For a business considering staking services, understanding this distinction is a necessary starting point.

Why Do Regulators Have Concerns About Staking?

The term staking is often used loosely across the crypto industry.

Some platforms use it to describe participation in blockchain validation. Others use terms such as “earn” or “rewards” for products that lend customer assets, deploy them in investment strategies, or promise returns through arrangements that are not directly tied to protocol validation.

These activities should not be treated as interchangeable.

Crypto lending and yield products raise their own questions about counterparty exposure, asset ownership, liquidity, and the use of customer funds.

The collapse of businesses such as FTX and BlockFi, alongside the Terra ecosystem’s failure, highlighted the consequences of poorly understood exposures and inadequate risk management across the crypto industry.

But those events do not mean that all staking arrangements operate in the same way or carry identical risks.

When assessing a staking service, it is important to establish exactly what happens to the customer’s assets, who controls them, how rewards are generated, and what happens if something goes wrong.

Three areas deserve particular attention.

1. Asset Loss and Withdrawal Restrictions

Staking involves risks that customers may not fully understand.

Depending on the protocol and arrangement, customers may face:

Losses arising from slashing or validator misconduct.
Reduced rewards caused by validator downtime or poor performance.
Delays in withdrawing or transferring staked assets.
Technical failures affecting the staking or withdrawal process.
Losses associated with compromised keys or security incidents.

The precise allocation of these risks depends on the protocol, the service provider’s role, and the contractual arrangements.

For example, if a provider pools customer assets and delegates them to a validator, the consequences of a validator penalty may extend to multiple customers.

If the provider fails to maintain adequate infrastructure or business continuity arrangements, customers may experience service interruptions or delays in accessing their assets.

The business must understand these risks before offering the service and explain them clearly to customers.

It should also establish appropriate controls for validator selection, monitoring, security, incident management, and withdrawal requests.

2. Asset Ownership, Custody, and Insolvency

Another major concern is the legal status of customer assets.

Who owns the staked tokens? Who controls the private keys? Can the provider use the assets for other purposes? What happens if the provider becomes insolvent?

These questions matter because the contractual and legal treatment of crypto assets may differ across jurisdictions.

Customers may assume that their assets remain separate from the provider’s own holdings. The actual legal position depends on the custody model, contractual terms, applicable law, and how the assets are held and recorded.

A provider’s terms and conditions may also attempt to limit its liability for technical failures, security incidents, or losses arising from the staking arrangement.

Those provisions do not automatically determine whether a particular limitation is legally enforceable, nor do they remove every regulatory obligation that may apply.

For businesses, the priority should be to establish a clear legal and operational framework for customer assets.

This includes assessing custody arrangements, ownership rights, asset segregation, record-keeping, insolvency treatment, and the responsibilities of third-party providers.

3. Market and Liquidity Risks

Staked assets may not be available for immediate withdrawal.

Some protocols impose withdrawal queues or unbonding periods. Others may allow withdrawals more quickly, depending on the network and the service arrangement.

These restrictions can become important during periods of market stress.

Imagine a customer who wants to sell an asset after a sudden price decline but cannot access it because the withdrawal process is delayed.

The customer may face a loss that could have been avoided if the asset were immediately transferable.

For providers, large numbers of withdrawal requests can also create operational challenges, especially where the platform has made promises about asset availability that it cannot fulfil under stressed conditions.

Ethereum illustrates how withdrawal timing can depend on network conditions and protocol rules, including the number of validators entering or leaving the active validator set.

Businesses offering staking should understand the relevant withdrawal mechanics and ensure their customer disclosures accurately describe the risks.

They should not promise instant liquidity if the underlying arrangement cannot support it.

How Different Jurisdictions Approach Crypto Staking

There is no single global regulatory framework for staking.

The applicable requirements depend on the jurisdiction, the service provider’s activities, the customer segment, the custody arrangement, and the structure of the product.

The following examples illustrate why businesses need to assess staking on a jurisdiction-by-jurisdiction basis.

The United States: Enforcement and Product Structure

US regulators have scrutinised certain crypto staking and rewards products, including services offered by major crypto platforms.

The legal questions can involve whether a particular product constitutes an investment contract or another regulated financial product, whether the provider has complied with applicable registration requirements, and whether customer disclosures adequately explain the arrangement.

The outcome depends on the facts, the product structure, and the applicable law.

It is important to distinguish between a platform operating its own validator infrastructure, a platform providing custodial staking, and a platform offering customers a broader rewards product that may involve the use or lending of customer assets.

These arrangements may raise different legal questions.

For businesses entering the US market, the key is to assess the actual product being offered rather than assume that all services labelled staking receive the same regulatory treatment.

Singapore: Restrictions and Retail Customer Protection

The Monetary Authority of Singapore (MAS) has addressed risks associated with digital payment token service providers offering staking and other activities to customers.

Singapore’s regulatory approach has included restrictions on certain staking and lending activities for retail customers, reflecting concerns about customer asset protection and the risks associated with these services.

The precise scope of the requirements depends on the applicable rules and regulatory guidance.

A business should not assume that a staking model permitted in another market can automatically be offered to retail customers in Singapore.

Providers need to assess the activities they conduct, the customers they serve, their custody arrangements, and the restrictions that apply under Singapore’s regulatory framework.

The European Union: MiCA and Crypto-Asset Services

The EU’s Markets in Crypto-Assets Regulation (MiCA) establishes a framework for crypto-asset issuers and crypto-asset service providers (CASPs).

MiCA addresses matters such as authorisation, conduct of business, custody, conflicts of interest, and the protection of clients’ crypto assets.

Its treatment of staking-related activities requires careful analysis of the actual service being offered.

For example, a provider that holds customer crypto-assets and arranges staking may raise custody and administration questions. A product that promises interest or rewards simply for holding certain assets may raise different questions about its structure and regulatory treatment.

It would be inaccurate to assume that MiCA imposes one blanket prohibition on all staking services or that every staking-related reward is treated as interest under the same rules.

Providers need to assess the specific product, the assets involved, the contractual arrangements, and the requirements applicable to their authorised activities.

Switzerland: FINMA’s Approach to Staking

Switzerland has developed its own regulatory approach to blockchain and crypto-asset activities.

The Swiss Financial Market Supervisory Authority (FINMA) has addressed staking-related risks, including questions concerning custody, the availability of staked assets, and the legal treatment of customer holdings.

The relevant requirements can depend on how assets are held, whether they are pooled, who controls them, and whether the arrangement creates obligations associated with regulated financial activities.

For a provider, these questions can affect the operating model, customer disclosures, custody structure, and the controls needed to manage withdrawal and insolvency risks.

Businesses should assess FINMA’s applicable guidance and the relevant Swiss legal framework before deciding whether a proposed staking service can be offered and what authorisations may be required.

The key lesson across these jurisdictions is that a staking product cannot be assessed solely by looking at the underlying blockchain protocol. The provider’s role and its relationship with customers are equally important.

What Crypto Businesses Should Consider Before Launching Staking Services

Before offering staking to customers, a crypto business should work through several practical questions.

1. What service are you actually providing?

Establish whether the business will operate validators, provide delegation, hold customer assets, manage a staking pool, distribute rewards, or offer a separate yield product.

Do not rely on the product’s marketing label to determine its regulatory treatment.

2. Who controls the assets and private keys?

Document the custody arrangement and establish who can initiate transactions, withdraw assets, or change the staking configuration.

Assess whether the arrangement creates custody, safeguarding, or other regulatory obligations.

3. How are rewards generated?

Explain whether rewards arise from blockchain validation, protocol incentives, lending, or another activity.

Customers should be able to understand the source of rewards and the conditions that affect their value.

4. What happens if something goes wrong?

Assess the consequences of validator downtime, slashing, cyberattacks, technical failures, and provider insolvency.

Establish clear procedures for incident management, customer communication, and the handling of losses.

5. When can customers withdraw their assets?

Understand the protocol’s withdrawal mechanics and any additional restrictions created by the provider’s operating model.

Ensure that customer disclosures and marketing statements reflect the actual conditions under which assets can be accessed.

6. Which legal and regulatory requirements apply?

Assess the applicable rules in each target market.

Consider licensing, custody, customer asset protection, financial promotion, consumer protection, and any restrictions that apply to retail customers.

Do not assume that a legal assessment conducted for one jurisdiction will be sufficient for another.

7. Are your contracts and disclosures clear?

Review the terms governing custody, asset ownership, reward calculations, withdrawal restrictions, slashing, third-party providers, and the allocation of losses.

Ensure that customers understand the material risks before they participate.

The Bottom Line: Staking Is Both a Technical and a Regulatory Question

Staking allows participants to contribute to the operation and security of certain blockchain networks and potentially earn rewards.

But once a business turns that activity into a customer-facing service, additional questions arise.

Who controls the assets? What happens when a validator fails? Can customers withdraw their holdings when they need them? What protections apply if the provider becomes insolvent? Does the service trigger licensing or other regulatory requirements?

These questions cannot be answered by looking at the blockchain protocol alone.

The regulatory analysis must account for the actual service, the provider’s responsibilities, the customer relationship, and the rules in each relevant jurisdiction.

For crypto businesses, the goal is not simply to find a way to offer staking.

It is to understand the risks, structure the service appropriately, and make sure the business can meet its legal and operational obligations before bringing the product to market.