Headline:
Body: So, as a confirmed capitalist (really, a broker once dribbled water on my head, maybe it was beer?) I become instantly interested and alert (maybe a bit cynical) when I read about a “non-profit” organization that has a mission of representing an industry. The Proof of Stake Alliance (POSA) therefore caught my attention. They do advocacy work on behalf of cryptocurrency firms, and my antennae went immediately to full height.
So, what do they DO?
Good question. They largely do advocacy work to make it easier for people to take advantage of blockchain technology. They focus most upon issues related to staking. Particularly, they are interested in reasonable taxation of staking rewards, and engineering of a commonsense legal framework to encourage liquid staking. (I was intrigued to read that the industry uses the phrase “staking reward” because “interest” is such a traditional finance term. This protocol should be avoided.)
The Nov. 9 announcement says three new principles will be added. First, staking providers will be encouraged to provide “clear communication […] to ensure users have all the information necessary to make informed decisions.” Second, users should be able to decide how much of their assets they want to stake, as this will promote “user ownership of staked assets.” Third, staking providers should have “explicitly delineated responsibilities” and “should not manage or control liquidity for users.”
In their blog post announcement, they said, “POSA urges service providers and key ecosystem participants to adopt the following industry-driven principles going forward, as staking continues to mature as a technical and commercialised service.”
POSA has to proceed cautiously, though, as the SEC is watching very carefully. In fact, the SEC just went after Kraken for $30 Million, claiming violation of securities. The new POSA staking principles have been framed to align with the SEC’s investor protection goals and allow staking providers to build trust and mitigate regulatory risks.
“Industry adoption of the best practice principles introduced by POSA will serve to further clarify how true staking services are technical services and are not securities, while also preserving consumer protection and responsible innovation.”
The Verdict
POSA is very interesting to me. When studying for the CPA Exam, I had to carefully look at what makes a “profession” and key to that is a self-governing set of principles that are adhered to, outside of law. In the field of accounting, there are several things that you are not allowed to do in your marketing efforts, and, if a member is found to be in non-compliance with respect to this guideline, they can be sanctioned by the association. It appears to me that POSA is working very hard to prove that the staking of cryptocurrencies is a mature activity, and they are bolstering their claim by working to prove that theirs is a self-regulating profession. The problem is that there are a good number of large firms that are not in POSA and do not have to live by their edicts, thereby making many of these attempts aspirational. Maybe this is enough?
REFERENCES
Proof of Stake Alliance updates recommendations for staking providers (cointelegraph.com)
Proof Of Stake Alliance (POSA) Updates Crypto Staking Principles – Forbes India
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.