In a surprising regulatory move, the Swiss Financial Market Supervisory Authority (FINMA) recently announced a planned change concerning staking services in the blockchain industry. If implemented, companies offering staking services would mandatorily require a bank license - a decision that has not been taken lightly by Switzerland's thriving crypto regulations.
Staking, an increasingly popular and energy-efficient mechanism used in blockchain networks like Ethereum, BNB Chain, and Cardano, involves participants depositing cryptocurrencies to validate transactions and in return, they receive a fee. With a staggering market capitalization of around USD 350 billion linked to staked assets, this innovative process is underpinned by various models, such as user-controlled and service provider staking.
At present, Switzerland plays host to both banks and exclusive service providers governed by the Money Laundering Act who offer these staking services. However, with FINMA's change in stance, all of that is set to be disrupted. The justification provided by FINMA revolves around the 'lock-up' of assets in staking protocols and the 'slashing' risk where assets might be confiscated if participants violate protocol rules. These stipulations have led FINMA to categorize staked assets as public deposits rather than deposit assets, necessitating a bank license.
The Swiss blockchain sector, represented by associations like the Swiss Blockchain Federation (SBF) and the Crypto Valley Association (CVA), is sounding the alarm on this new interpretation. According to these organizations, staking fundamentally differs from banking services and should not be held to the same standards. They further argue that such a change would undermine the crypto regulations established by the unanimously passed DLT legislation, which was designed to enhance customer protection during financial institution insolvencies.
If FINMA’s decision remains unchanged, the consequences could be dire for Switzerland's blockchain innovation. The new practice would likely drive staking businesses overseas, eradicating non-banks from offering these services. While banks do possess the required licenses, the stringent capital requirements tied to crypto transactions would render them uncompetitive.
Furthermore, this move stands to impact Swiss customers directly. The absence of deposit insurance in staking scenarios could pose significant risks.
In response, the blockchain community in Switzerland is urging FINMA to maintain transparency in its regulatory process and engage with relevant stakeholders. They argue that the proposed changes contradict FINMA’s objective to bolster Switzerland as a global financial hub. Instead, it poses a genuine threat to the nation's innovation and international competitive edge.