The Proof of Stake Alliance (POSA), a community-driven advocacy organisation for Proof of Stake (PoS) technology, has announced steps aimed at improving the regulatory landscape that surrounds the Staking as a Service (STaaS) market.
It comes as digital asset innovators are increasingly embracing Proof of Stake as the consensus protocol of choice for their networks.
Joe Lallouz, CEO of POSA member Bison Trails commented: “As blockchain and Proof of Stake protocols transform the digital economy, it is becoming increasingly important that professional infrastructure providers demonstrate a more proactive commitment to upholding their responsibilities within the ecosystem.
“At Bison Trails, we support POSA’s initiative to engage regulators and establish responsible standards for the industry at large. We believe these efforts will serve to strengthen trust in the Proof of Stake ecosystem and help foster greater innovation.”
It follows a meeting in February, in which POSA engaged with the staff of the U.S. Securities and Exchange Commission on these topics. The purpose of this meeting was to educate the SEC staff about PoS technology and support a productive dialogue with the SEC regarding the regulatory framework for STaaS offerings.
POSA submitted a white paper containing a legal analysis from the international law firm of Paul Hastings LLP, as well as a comprehensive overview of Proof of Stake and the STaaS market, and continues to engage in an ongoing dialogue with the SEC concerning the legal analysis.
Matt Perona, Chief Operating Officer of POSA member Polychain Capital added: “We are grateful for the time and the opportunity to converse with the SEC staff and their willingness to continue the dialogue with us. Through our initial engagement, we were able to share useful insights into the functioning of Proof of Stake networks and the STaaS market that will serve as a foundation for further collaboration going forward.”
Bryce Ferguson, Product Manager of POSA member Coinbase Custody also stated: “Staking continues to gain momentum as a core security mechanism for new blockchain networks. It’s critical that the industry has an open dialogue with regulators, and that staking service providers abide by certain standards. By acting together, industry players can help ensure that Proof of Stake networks continue to flourish.”
POSA also previewed a set of industry-driven solutions, developed by a group of its members, and was encouraged by the reception from the SEC staff concerning an industry effort to develop such solutions:
● Refrain from Investment Advice – A service provider should not provide investment advice to market participants, nor make any recommendations as to whether or not a market participant should purchase a particular Proof of Stake digital asset. The service provider should make no representations to market participants as to potential appreciation in the value of the staked digital asset.
● Use Non-Financial Terminology – A service provider should not advertise or promote staking rewards as a profit opportunity by utilizing words such as ‘interest,’ ‘dividend,’ or ‘yield.’ POSA suggests the use of terminology such as “Inflation” or ‘Staking Reward’.
● Focus on Security & Participation – A service provider’s advertising should focus on enhancing participation in both the consensus protocol and the security of the network.
● Focus on Providing Access to the Protocol – A service provider should refrain from making statements that indicate that it has control over the staking inflation rate for the applicable Proof of Stake protocol.
● Do Not Provide Guarantees on Amount of Rewards Earned – A service provider should not provide any guarantees or make any commitments as to the amount of staking rewards to be earned pursuant to the service relationship.