The European Commission is consulting on whether staking services require dedicated regulatory rules beyond the protections already embedded in MiCA, the bloc’s comprehensive crypto rulebook.
The consultation, which closes September 30, 2024, at 23:59 CEST, asks whether existing custody and administration frameworks sufficiently govern staking activity or whether new dedicated rules are necessary. The European Securities and Markets Authority (ESMA) and European Banking Authority (EBA) have flagged specific risks in staking markets that may inform the Commission’s review.
Current Staking Landscape and Existing Rules
Liquid staking protocols and staking-as-a-service providers already fall under MiCA’s custodial regime. Article 70 imposes client-asset safeguards that prevent firms from treating customer assets as proprietary inventory. Article 75 requires procedures for returning customer crypto. ESMA guidance distinguishes between proprietary staking, where customers directly participate, and staking-as-a-service, where intermediaries provide the service.
MiCA also prohibits crypto asset service providers (CASPs) from staking customer crypto for their own benefit, creating a clear separation between customer assets and firm capital.
Liquid staking alone represents a substantial market. In October 2024, the EBA and ESMA estimated the sector at $44 billion in value. Ethereum accounts for 80 percent of liquid staking activity. Lido, the largest liquid staking protocol, carried an estimated value of $25 billion at the time of the regulators’ assessment.
Identified Regulatory Gaps and Risks
The EBA and ESMA risk assessments have identified four specific concerns in staking markets: validator slashing (penalty mechanisms that reduce staked assets), withdrawal delays that lock customer funds, opacity in reward calculation, and the depegging of liquid staking tokens from their underlying assets.
Validator distribution also affects proof-of-stake network security. Running an Ethereum validator directly requires 32 ETH, a barrier that has driven adoption of intermediated staking services and created concentration risk in the hands of large staking providers.
The Consultation and Next Steps
The Commission’s consultation on page 36, item 66, poses the core question: whether the existing MiCA framework adequately addresses staking-specific risks or whether dedicated rules are warranted. The Commission has not disclosed a preliminary position on the outcome, and the specific content of any potential dedicated regime remains undefined.
The consultation period ends September 30, 2024. The Commission’s decision on whether to propose new staking-specific rules will likely follow input from ESMA, the EBA, and industry participants.
