In early 2023, FINMA expressed concerns about staking services, hinting at banking license requirements. Yet, Guidance 08/23 (20 Dec 2023) clarifies applicable DLT regulations. Providing staking services require no banking license under specific criteria, ensuring legal certainty.
Background:
With the introduction of the DLT Act in August 2021, a legal framework was established for the custody of cryptoassets, safeguarding customers in case of custodian bankruptcy. As staking services gain prominence, FINMA addresses queries on applying custody rules to staking. The adoption of a proof-of-stake mechanism by Ethereum and changes in economic conditions have heightened concerns, prompting FINMA to engage in roundtable discussions and conduct surveys with supervised institutions. The provided guidance outlines FINMA's approach to supervising staking services, clarifying distinctions between protected custody assets and deposits at risk of insolvency. It also addresses associated bank licensing requirements and the impact on capital obligations for authorized institutions. FINMA outlines the legal consequences as follows:
Staking Chain:
In the case of staking chain delegation, an institution may recognize a claim on a third-party provider, which is treated as a fiduciary claim, under specific conditions. Prerequisites include a fiduciary agreement, risk disclosure and due diligence to limit counterparty and operational risks. The institution must ensure the third-party provider is authorized, holds withdrawal keys, records validator addresses and has measures in place to limit operational risks.
Direct Staking:
For direct staking, where the institution handles staking and withdrawal keys, segregation under Article 16 para. 2 Banking Act does not apply. Currently, FINMA will not enforce capital requirements if specific conditions are met, among others transparent risk disclosure, operational risk mitigation and the availability of a Digital Assets Resolution Package (DARP). This practice will only be applied on a temporary basis.
Direct Staking by Unlicensed Participants:
Unlicensed participants in custodial direct staking may not require a banking license if certain conditions are met, such as individual custody and joining a self-regulatory organization for anti-money laundering supervision. Note: collective custody of payment tokens may typically require a banking or a fintech license.
Conclusion:
FINMA's guidance fosters legal certainty and lay the foundation for an innovative industry. In recognition of the fact that this guidance is the result of existing legal uncertainty, FINMA emphasizes its validity until potential court rulings or international developments necessitate a re-evaluation.
