MiCA Regulation Traps Staking Providers in Uncertainty

The European crypto regulation MiCA has been in effect across the EU since July 1, 2023, but it doesn't explicitly recognize staking as a service. This murkiness affects staking providers and their customers, particularly those who delegate coins through a provider.

According to Regulation (EU) 2023/1114, crypto-asset services are categorized into two groups: the operation of a trading platform, exchange, custody, administration, transfer services, placement, reception, transmission, execution of orders, advice, and portfolio management. Staking doesn't appear on this list, but it's not entirely unregulated.

Providers that offer staking to retail investors typically involve at least one of the listed activities. The licensing requirement is tied to what the provider actually does, not just the label they use. Almost every staking offering involves custody and administration of crypto-assets on behalf of clients, which is covered under the first set.

Providers that hold private keys for customers are fully subject to authorisation as crypto-asset service providers (CASP). This includes centralised exchanges, broker apps, and most providers advertising rewards as an annual percentage. Authorisation brings obligations such as segregation of client holdings from proprietary ones, requirements on organisation and complaints handling, and disclosure duties.

However, there's a catch: if customers consent to the provider using their coins for its own account or third parties, they may forfeit the protection in case of insolvency. Non-custodial staking and solo staking are exempt from MiCA regulations as long as no intermediary sits between the customer and the network.

For staking clients, it's crucial to check if their provider has a CASP authorisation. The legal entity matters, not just the brand name. An authorisation covers specific services, so even licensed providers may not be eligible for all staking activities.