On 19 November 2024, Rosenblatt and Memery Crystal held the latest event in their breakfast briefing series on staking and institutional crypto assets. Led by Partner, Laura Clatworthy (Head of Digital Assets and Web3) and moderated by Jonny Fry (Head of Digital Asset Strategy, ClearBank), the panel comprised Helen Disney (CEO, Unblocked), Eva Lawrence (Head of EMEA, Figment), Peter Lane (Co-Founder and CCO, Jacobi Asset Management), and Elise Soucie Watts (Executive Director, Global Digital Finance).
Key takeaways from the discussion were:
- The election of Donald Trump and the elevation of Elon Musk potentially promise the development of a blockchain- and crypto-friendly environment, and a boom for the digital assets market, as we are already seeing. Staking and crypto ETFs are anticipated to be strong growth areas. However, panel member Helen Disney noted that this boom might prove a double-edged sword, as it may lead regulators to worry about speculative excess and to dwell on past crypto scandals such as Mt Gox and FTX.
- With the changing political landscapes globally, further education at government level is required and the digital asset market must seek to re-educate investors and regulators alike on the promise of the underlying technology.
- Staking allows token owners to earn rewards for in return for delegating them to help secure a particular blockchain network. This incentivises users to continue to hold the digital assets on the network, rather than to dispose of them. It is a way for token holders to take part in the governance of the blockchain – though in practice many staking parties limit their involvement by delegating voting decisions to the network provider, opting out, or assigning a proxy.
- Eva Lawrence explained that there are many misconceptions around staking. For example, staking does not involve any transfer of title, does not involve lending (only delegation), and non-custodial protocol staking does not require assets to be custodied by a staking provider as the ownership and title remains with the token holder.
- The staking market is growing and becoming more complex, as we see further progress in developments such as re-staking / cross-chain staking (staking the same tokens on the main blockchain and other protocols, with interoperability between different blockchains), liquid staking, and new products such as staking derivatives and staking ETP/ETFs.
- Peter Lane discussed the long and arduous process involved in securing regulatory approval for the first Bitcoin ETF launched by Jacobi Asset Management in November 2023. More crypto ETFs are in the pipeline but, for the time being, regulators are restricting them to wholesale rather than retail investors.
- Elise Soucie Watts provided an analysis of the global regulatory position on staking and ETFs. Regulators have concerns about consumer harm and do not understand many of the key concepts. There is increasing regulatory clarity in some jurisdictions, such as Dubai and the EU, but regulatory confusion remains in others, such as the UK and the USA. In fact, the deregulatory agenda promised by a Trump presidency might be unhelpful, as it would leave key questions unanswered in relation to staking and stablecoins. The digital assets sector must push for US (and UK) legislation and regulation to provide clarity and certainty
- The rise of meme coins was discussed with differing views on whether they are another hyped trend or something more substantial. It was however generally agreed around the table, that meme coins demonstrate that the retail market wants to access and will find ways to access crypto and other digital assets, despite regulators trying to prevent that. The concern is to ensure that the regulators enable retail access in reputable jurisdictions rather than pushing consumers into higher-risk jurisdictions and marketplaces.
For more information, please contact Laura Clatworthy.
