Executive Summary

This response addresses the Financial Conduct Authority's Consultation Paper CP26/13 on Cryptoasset Perimeter Guidance (PERG 19). 

The Solana Research Institute is an independent, member-owned not-for-profit entity that researches topics related to the adoption of public blockchain and crypto assets by mainstream finance.  Our research focuses on Solana as a leading example of a public blockchain that seeks to become an infrastructure for supporting financial business.  However, our interests extend beyond Solana to the substance of the underlying topics.  

The views expressed in this submission are those of the authors alone.  They do not necessarily reflect the views of our members and are not endorsed by them, some of whom may also have submitted their own responses to this consultation.

Our central submission is that the proposed guidance, in combination with the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (SI 2026/102, the "Regulations"), applies a regulatory framework calibrated for financial intermediaries with credit and custody risk to activities that are architecturally incapable of generating those risks. The result is a regime that is disproportionate to the harms it seeks to address, without international precedent in its breadth, and likely to drive UK firms and UK consumers out of participation in public permissionless blockchain networks.

We make this submission conscious that the FCA's discretion in interpreting the Regulations is constrained by the primary legislation. Where our criticisms are directed at the Regulations themselves, we acknowledge that the FCA cannot address them through guidance alone. We include those criticisms because they are material to the policy objectives the government has stated, and because we urge the FCA to use all available discretion to mitigate rather than amplify their effects.

Our principal recommendations are that the FCA should:

• Narrow the interpretation of 'arranging qualifying cryptoasset staking' to exclude non-custodial native-protocol staking, in which the validator never controls client assets and the staking mechanism is governed entirely by the protocol.
• Introduce a technical services exclusion for the arranging deals activity that mirrors the exclusion already provided for the arranging staking activity, and should clarify that 'orders' does not extend to unidirectional peer-to-peer transfers.
• Engage HM Treasury to seek legislative clarification on the definition of 'orders' and to extend the stablecoin payments exclusion to cover all qualifying stablecoins, not only those issued by FCA-authorised issuers.
• Interpret the arranging deals activity narrowly so that the provision of non-custodial wallet software does not fall within its scope, and should engage HM Treasury on a statutory technical services exclusion equivalent to that available for staking 
• Engage HM Treasury on the disproportionate compliance burden facing small and mid-tier validator operators, and consider whether a lighter-touch disclosure-based regime would better address the genuine consumer risks present.

1. Context and Scope of This Response

This response addresses certain points raised in the PERG and in SI 2026/102. It covers these points broadly, reflecting the interconnected nature of the issues raised. A table in Appendix A maps our arguments to the FCA's specific consultation questions that pertain to them.

1.1 The Legislative Context

SI 2026/102 was approved by Parliament on 4 February 2026 and comes into force on 25 October 2027. It extends the FCA's regulatory perimeter by inserting new regulated activities into the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), including arranging qualifying cryptoasset staking (Articles 9Z6-9Z9) and dealing in and arranging deals in qualifying cryptoassets. The FCA's proposed PERG 19 guidance interprets those activities and the perimeter they define.

CP26/13 is a guidance consultation, not a rulemaking. The FCA correctly notes at paragraph 2.3 that it does not change the perimeter set by the Regulations. However, the interpretive choices made in PERG 19 have profound practical consequences for which firms must seek authorisation, and for firms that cannot or will not do so, whether they can continue to serve UK consumers at all.

1.2 The Principle at Stake

Regulators worldwide, confronted with the novelty of cryptoassets, have adopted the mantra: same asset, same risk, same regulation. The intent is reasonable—to prevent financial instruments issued on-chain from side-stepping established regulatory requirements. A security is a security, whatever the infrastructure on which it is issued.

But if the principle of proportionality to risk is applied consistently, it must also mean that where the risks are genuinely different, the regulation should be different. The activities addressed in this response—delegated staking, liquid staking, and non-custodial wallet provision—do not create the credit risks, custody risks, counterparty risks, or informational asymmetries that financial services regulation is designed to address. Applying that regulatory architecture to activities that cannot generate those risks is not proportionate consumer protection; it is regulatory displacement that serves no one.

2. Delegated Staking: Misapplication of the Financial Intermediary Framework

2.1 The Nature of Staking

Staking is the mechanism by which nodes in a proof-of-stake blockchain commit collateral in the form of the protocol's native cryptocurrency to earn the right to participate in block formation and validation. The collateral requirement deters malicious participants; honest behaviour is incentivised by protocol-generated fees. Some protocols, notably Ethereum, use the possibility of slashing,  the confiscation of a portion of stake from nodes that demonstrably undermine protocol integrity, such as by proposing conflicting blocks, to deter malicious behaviour.

Many nodes collect stake from third parties in return for a share of rewards, a practice known as delegated staking. In protocols such as Solana, this delegation is governed entirely by the protocol: the delegator's assets remain in their own wallet, locked by the protocol for the duration of each staking period. The node operator has no access to, or discretion over, the delegated stake at any point during the staking period.

2.2 Why the Risk Profile Is Fundamentally Different

Delegated staking bears a superficial resemblance to term deposits or money market funds. A participant commits assets for a period and receives a yield. But on closer analysis, the risk profiles are categorically different:

• The staking node has no discretion over the use of delegated stake. Assets remain in the delegator's wallet, locked by the protocol. There is no opportunity for the node operator or a malicious third party to gain control of the asset. This is unlike any financial product where the provider gains operational control of client funds. 
• Bugs in the stake program itself remain a theoretical risk, but this is a risk inherent to the underlying protocol and is borne equally by every holder of the asset, staked or not—it is not a risk that financial services authorisation of an operator could address.
• Staking yield is calculated deterministically by the protocol as a function of total network transaction flow, the node's share of total stake, and its block-signing performance. The node's only discretion is the commission rate it charges. All parameters are publicly visible in real time on validator comparison sites.
• There are no credit risks: the protocol cannot become insolvent. There is no fractional reserve, no maturity transformation, and no unsecured credit exposure. The regulatory architecture of banking regulation—capital adequacy, deposit protection, creditor hierarchy—addresses risks that are architecturally absent in native protocol staking.
• Market discipline operates powerfully and transparently. A validator's performance—uptime, commission rates, reward generation—is publicly observable in real time. Switching costs between validators at epoch boundaries are minimal, particularly on low-fee networks such as Solana. The market discipline that results is illustrated by Ethereum's slashing record: since slashing was activated in 2020, fewer than 500 validator instances out of more than one million have been slashed, and almost all were attributable to operator configuration errors during key migrations rather than malicious conduct. Given that a single node operator typically runs many validator instances, the number of distinct operators who have experienced slashing is smaller still.

2.3 The 'Without Further Involvement' Test

Article 9Z9 of the RAO excludes the operation of a validator node from the arrangement of qualifying cryptoasset staking activity. The proposed PERG19 guidance interprets this exclusion as applying to the 'operation of a validator node without further involvement'. This qualifier is critical and, in our submission, needs more precise articulation.

The proposed guidance identifies 'managing the end-to-end staking lifecycle—where a person oversees or enables a process through which qualifying cryptoassets are staked, rewards are generated, and rewards are distributed or reinvested' as an example of activity that may fall within scope. On a non-custodial native staking model such as Solana, this description could be read to capture a validator that: (a) solicits delegations through a public website; (b) operates infrastructure through which staking rewards are generated; and (c) facilitates the return of rewards to delegators at epoch boundaries. 

We submit that this reading would be incorrect. The validator is functioning merely as a gateway to the Solana protocol, and the 'management' of the lifecycle is performed by the protocol, not the operator. The protocol itself controls both assets staked and the distribution of rewards to delegators' stake accounts at the epoch boundary. The operator contributes technical infrastructure; the protocol contributes the financial architecture.

We urge the FCA to clarify in the final guidance that the 'without further involvement' qualifier refers to active commercial intermediation—taking discretionary decisions about client assets, pooling assets in ways that require the operator's management discretion, or providing advisory services about staking allocation—rather than the passive receipt of protocol-governed delegations through a publicly available validator node.

2.4 Protocol Architecture Should Determine Regulatory Treatment

The proposed guidance correctly states at paragraph 2.11 that 'the fact that an arrangement involves smart contracts, public blockchains or some elements of decentralisation does not determine the perimeter position.' We agree that the existence of blockchain technology is not itself a regulatory carve-out.

However, we submit that the technical architecture of the specific protocol is highly relevant to the risk analysis that should underpin the perimeter determination. A framework calibrated to custodial staking models is not appropriate for Solana's native delegation mechanism, where no custody transfer occurs. 

We urge the FCA to develop protocol-specific guidance, or at minimum to articulate clearly in PERG 19 that the perimeter analysis for staking will take into account: (a) whether custody or control of client assets transfers to the operator; (b) whether the operator has any discretion over the deployment of staked assets; and (c) whether the yield generation mechanism is deterministic and protocol-governed or discretionary.

2.5 International Comparison

The UK's proposed treatment of delegated staking as a regulated activity is not unprecedented internationally, but the breadth of that treatment is. A comparison with Switzerland is instructive:

FINMA initially proposed in summer 2023 that staking services would require a banking licence. Following industry consultation, FINMA reversed that position in Guidance 08/2023, concluding that non-custodial staking requires no licensing. Even custodial staking does not require a banking or fintech licence, provided assets are held in individual custody with separate blockchain addresses for each client. FINMA's reasoning was explicit: the risks present in staking are not the risks that banking regulation is designed to address.

The EU's MiCA framework does not regulate staking as a standalone activity. Staking becomes regulated only when ancillary to a CASP custody licence. The US has recently moved in the opposite direction from the UK: the joint SEC/CFTC interpretation of March 2026 placed all mainstream staking models—including custodial delegation—outside federal securities regulation.

The UK would, on current proposals, be the only major jurisdiction to require financial services authorisation for non-custodial native protocol staking. We do not submit that international consensus is determinative of the right answer, but the absence of any comparable framework globally should prompt the FCA to examine carefully whether its proposed approach is proportionate.

3. Liquid Staking Tokens: Classification and Proportionate Treatment

3.1 The Architecture of Liquid Staking

Liquid staking addresses the illiquidity inherent in the staking commitment. Liquid staking protocols issue a transferable token (an LST) representing the depositor's claim on their staked assets. The LST has a contractually fixed relationship with the underlying stake, enforced by open-source smart contract code. It is redeemable at the end of each staking period and tradeable in the secondary market in the interim, providing flexibility in managing short-term liquidity.

3.2 LST Issuance Is Not Dealing as Principal

The RAO’s Explanatory Memorandum characterises LST issuance as a dealing activity, but that characterisation is not supported by the operative text of the RAO. The activity of dealing as principal in the RAO captures a person who buys, sells, subscribes for, or underwrites a qualifying cryptoasset as counterparty to a client transaction. LST issuance does not fit within this scope.  There is no price; the exchange ratio is fixed at 1:1 by the smart contract and cannot be varied by the issuer. There is no spread, the issuer does not profit from the exchange itself and neither does the issuer benefit from any price changes in the asset being staked. Further, some of the major LST protocols in crypto are governed by DAOs with immutable or multisig-controlled contracts, meaning there often isn't a legal person to authorize.    Finally, the issuer has no discretion over the use of the asset: it cannot re-hypothecate it, redeploy it or use it to meet any other obligations and these restrictions are enforced by protocol and/or smart contract logic that is open-source and auditable by any party.  In fact, the issuer is not a counterparty in any financial markets sense. It is the operator of a protocol that issues a receipt. 

The Explanatory Memorandum is not part of the operative legislation and carries no legal force. We urge the FCA not to adopt its characterisation of LST issuance as dealing in the final PERG 19 guidance, and instead to apply the RAO test on its own terms. On that analysis, LST issuance is the operation of a protocol that issues receipts against committed assets—an activity with no meaningful parallel in the dealing framework.

3.3 LSTs Fall Outside the Qualifying Cryptoasset Definition

SI 2026/102 excludes from the qualifying cryptoasset definition any asset that is “solely a record of value or contractual rights, including rights in another cryptoasset.”  Without prejudice to our submission in 3.2, we also submit that LSTs fall squarely within this exclusion and that the FCA should confirm this in the final PERG 19 guidance.

An LST is, in substance, a receipt acknowledging that assets have been committed to a staking protocol and evidencing the holder’s right to recover those assets plus accrued rewards. Its entire economic content is that relationship with the underlying staked asset. It has no independent yield, no independent cash flows, and no economic function divorced from the underlying stake it represents. That it also trades on secondary markets and is used as DeFi collateral does not alter its fundamental character; a warehouse receipt also trades, but remains a record of rights in the goods it represents. 

The consequence of this analysis is that LSTs fall outside the qualifying cryptoasset definition entirely. Neither the dealing activity nor the arranging staking activity of SI 2026/102 applies. The 2025 Staking Order’s exclusion of staking arrangements from the collective investment scheme definition provides the additional regulatory comfort, and no further authorisation is required for LST issuance or secondary market trading.

The genuine risks present in LST arrangements are operational and technological in character: smart contract vulnerabilities, validator key management failures, and protocol governance changes. These are real risks. But they call for operational resilience standards, audit requirements, and disclosure obligations—not dealer regulation.

3.4 The Genuine Risks

The actual risks faced by LST holders fall into two categories.

Firstly, there are operational risks arising from smart contract vulnerabilities.  Many potential holders of LSTs are ill-equipped to evaluate these risks on their own account.  However, they call for operational resilience standards, audit requirements, and disclosure obligations—not dealer regulation.

Secondly, there is a risk of “depegging,” in which the LST could trade at a discount to the underlying stake.  The discount at which stETH traded relative to ETH during May-June 2022—reaching approximately 8% at its peak—is frequently cited as evidence of LST risk. A precise understanding of this event is important for the regulatory analysis.

The stETH depeg arose from the coincidence of two factors: (i) extreme market stress following the Terra/LUNA collapse, which triggered widespread institutional deleveraging; and (ii) a structural feature specific to the Ethereum protocol in that period, namely that staked ETH could not be redeemed directly—the only exit route was secondary market sale. This prevented arbitrage from closing the discount.

Notwithstanding this, Lido's smart contract functioned correctly throughout. Every unit of stETH remained backed by exactly one unit of staked ETH on the Beacon Chain. When Ethereum's Shapella upgrade in April 2023 enabled direct redemptions, holders who had held through the stress period recovered their principal in full. 

The regulatory lesson is clear: regulation of the LST issuance would not have addressed the cause of this event.  Regulatory focus should instead be directed at those building excessive leverage.

4. Non-Custodial Wallet Provision: An Unprecedented and Disproportionate Regulatory Extension

4.1 The Proposed Treatment

The FCA proposes in PERG 19 that a firm which 'provides users with the means to make, place or otherwise send orders and receive confirmation that a transaction has been completed' may be carrying on both forms of the arranging deals in qualifying cryptoassets activity and therefore requires FCA authorisation.

On the face of this guidance, a non-custodial software wallet—an application running on a user's own device, which manages cryptographic keys and enables the signing and broadcasting of blockchain transactions—falls within scope. Characterising wallets as dealers stretches the bounds of logic. Wallets are merely software instances that provide tools to execute user instructions. They have no information about the counterparty to any transaction nor the rationale for undertaking it; they charge no fees for individual transactions.

4.2 The Problem With 'Orders'

The word 'orders' is not defined in SI 2026/102 or in the proposed PERG guidance. This is a significant omission, given that the FCA's proposed perimeter for the arranging activity turns critically on whether the activities of a software wallet constitute 'making, placing or otherwise sending orders'.

In traditional financial markets, an 'order' is definitionally linked to a bilateral exchange transaction—an instruction to buy or sell a financial instrument at or above/below a specified price, directed to a market or counterparty. The concept presupposes a transaction in which two parties exchange value. A unidirectional transfer of assets from one party to another, of a bank payment, for example, has never been classified as an 'order' in any jurisdiction or regulatory framework.

That HM Treasury felt it necessary to introduce a specific exclusion for transfers of FCA-authorised stablecoins in the draft amending regulations published in April 2026 provides implicit confirmation that transfers of value would otherwise be captured by the proposed guidance. You do not need an exclusion for an activity that was never in scope. This is an important concession—but as we discuss below, it is insufficient.

In any case, the nature of instructions sent is not a good basis for determining the regulatory status of a wallet.  A wallet's function is to construct, sign, and broadcast a message at the user's direction. The order book, the matching engine, the price-time authority, and the fill all sit inside an autonomous smart contract on an open network, of which the wallet has no means of being aware, let alone influencing. 

4.3 The Stablecoin Exclusion: Necessary but Inadequate

The April 2026 draft amending regulations introduce a new Article 9Z10A into the RAO, excluding from the scope of the dealing and arranging activities the transfer or exchange of 'relevant qualifying stablecoins' — defined as stablecoins issued by FCA-authorised issuers under Article 9M.

We welcome this exclusion but submit that it provides limited practical relief for the following reasons:

• The exclusion applies only to stablecoins issued by FCA-authorised issuers. USDC (Circle) and USDT (Tether),  together account for the overwhelming majority of stablecoin transaction volume globally. Along with most other stablecoins, they are not issued by FCA-authorised issuers and are not currently expected to become so before the October 2027 go-live. Wallets supporting transfers of these instruments remain potentially in scope, meaning that two transactions identical in every respect apart from the asset to be transferred would attract completely different regulatory treatment.
• The exclusion does not address non-stablecoin peer-to-peer transfers, which face the same analytical problem: a transfer of ETH, SOL, or any other qualifying cryptoasset from one address to another is a unidirectional transfer of value, not an 'order' in any meaningful financial markets sense.
• Even for stablecoins that do obtain FCA authorisation, a wallet that enables DeFi activity—swapping, providing liquidity, and yield strategies—involves transactions with characteristics of exchange, and those transactions would remain potentially in scope.

We urge the FCA to provide a clear interpretation in the final PERG 19 guidance that the term 'orders' in the arranging deals activity does not extend to: (a) unidirectional peer-to-peer transfers of qualifying cryptoassets; or (b) user-initiated interactions with smart contracts where no intermediary takes a position or exercises discretion on the user's behalf.

4.4 The Asymmetry of Approach

Article 9Z9 of the RAO provides a technical services exclusion for certain staking activities, including the operation of a validator node. No equivalent exclusion exists for the arranging deals activity. This asymmetry has no principled justification. If technical services supporting staking can be excluded because the service is technological rather than financial in character, the same logic should apply to software enabling users to initiate transactions.

The same point can be made in the opposite direction.  Wallets provide just one of the “…means to make, place or otherwise send orders and receive confirmation…”.  Many other providers are involved in the transaction process, including RPC providers, data dissemination services, block explorers, hardware wallet manufacturers, and internet browsers. Yet, rightly, these services are out of scope. 

We submit that the FCA should seek legislative clarification from HM Treasury on whether an equivalent technical services exclusion for the arranging deals activity can be introduced, and should, in the interim, interpret the existing exclusions as broadly as the legislative framework permits.

4.5 The Absence of International Precedent

We are not aware of any major jurisdiction that has imposed financial services authorisation requirements on non-custodial wallet providers on the basis of their provision of transaction management functionality. A review of the principal comparator frameworks confirms this:

The UK's proposed position is, on current evidence, unique globally. We do not submit that novelty is itself evidence of error, but the absence of any comparable framework in any jurisdiction — including those with sophisticated and active crypto regulatory programmes — should prompt the FCA to examine whether its proposed interpretation of the arranging activity is consistent with the legislative intent of the Regulations.

4.6 Practical Enforceability

Beyond the proportionality and legal analysis, we note a fundamental practical concern: the proposed regulatory extension is largely unenforceable against the most commercially significant wallet providers.

Non-custodial wallet software is open-source code, freely available on public repositories, and trivially downloadable by any UK user regardless of where the developer is located. Geofencing by IP address is circumvented by VPN. The FCA could impose authorisation requirements on UK-incorporated wallet developers and achieve compliance from that subset, while the majority of actual UK wallet usage migrates to ungovernable open-source software or overseas providers who accept geofencing as a less costly option than compliance. The outcome is not consumer protection; it is the displacement of compliant, audited, accountable software by unconstrained alternatives.

5. Proportionality and the Compliance Cost Burden

If aspects of the RAO and PERG19 are inappropriate, the costs are also disproportionate. We illustrate the proportionality concern with a worked example of a tier 2 Solana validator. A validator positioned at approximately the 75th rank by delegated stake on the Solana network holds approximately 1.35 million SOL in delegated stake. At current network economics — 5.63% annualised staking yield on $117.9m of delegated assets, 0% commission — total annual yield flowing through the validator is approximately $6.6 million, all of which is distributed to delegators.  The validator’s revenue comes from block leader priority fees and a 10% commission on Jito MEV tips, generating annual revenue of approximately $250,000–$400,000.

Assuming this validator is already UK-based, the estimated costs of FCA authorisation under the proposed regime are:

Against an annual revenue of $250,000–$400,000, these figures represent: initial costs of 34–116% of annual revenue, plus ongoing compliance costs of 12–42% of annual revenue. For a validator at the lower end of commercial viability, the compliance burden is likely to exceed annual revenue entirely.

We submit that this proportionality analysis — a compliance cost representing potentially 40% of revenue for a mid-tier validator — cannot be justified by the consumer risks present in a non-custodial staking model where the validator has no access to client assets at any point. The appropriate regulatory response to the genuine risks present — disclosure of commission rates, unbonding periods, and technical performance — is a targeted disclosure regime, not full financial services authorisation.

The FCA is required by section 1B(4) of FSMA to carry out its general functions 'in a way which promotes effective competition in the interests of consumers'. We submit that a compliance burden of this magnitude, applied to non-custodial staking services, will not promote competition — it will eliminate the smaller and independent validators on which the decentralisation and security of public blockchain networks depend, in favour of large institutional operators for whom compliance costs are a smaller proportion of revenue.

6. Wider Consequences for UK Participation in Public Blockchain Networks

The UK government has stated its ambition to establish the country as a global hub for digital assets and financial technology. That ambition is compatible with a robust regulatory framework for genuinely risky financial activities. It is not compatible with a framework that makes participation in the basic infrastructure operations of public permissionless blockchains uneconomic for UK-connected firms.

The consequences of the proposed perimeter, if maintained in its current form, are predictable:

• UK-based validator operators will reconsider their location or exit the activity entirely. Overseas validators will geofence UK users rather than incur compliance burdens for a sub-scale market. The Solana Foundation's stake delegation programme — designed to encourage network participation and decentralisation — directly conflicts with a regulatory framework that makes UK participation economically unviable.
• UK citizens seeking non-custodial wallet services from overseas providers will find those providers have blocked them. This does not protect UK consumers; it limits their access to the tools required to participate in public blockchain networks at all. A UK citizen who cannot access a compliant wallet cannot participate in delegated staking, cannot hold or transfer qualifying cryptoassets without using a custodial intermediary, and cannot engage with DeFi applications.
• The innovation disadvantage is compounding. Dramatic advances in public blockchain networks — in latency, finality, market microstructure, privacy-preserving computation and cost of development — are announced almost weekly. Firms build the expertise to develop next-generation financial applications by participating as infrastructure operators, liquidity providers, and protocol developers. A regulatory framework that excludes UK firms from these roles does not protect UK consumers from risk; it ensures that the expertise and activity concentrates elsewhere.

We note in this context that the purpose of the Regulations, as stated in paragraph 1.3 of CP26/13, is to develop 'a competitive and sustainable cryptoasset sector where UK consumers are served by authorised cryptoasset firms and can make informed decisions'. A perimeter that causes overseas firms to geofence the UK does not serve UK consumers; it removes their choice. A perimeter that eliminates UK-based infrastructure operators does not create a sustainable sector; it creates a vacuum.

7. Summary of Recommendations

Recommendations within the FCA's current discretion

The following recommendations can be implemented through the final PERG 19 guidance without legislative amendment:

• Clarify that the 'without further involvement' qualifier in the validator node exclusion refers to active commercial intermediation and control over client assets, not the passive receipt of protocol-governed delegations by a publicly available validator.
• Confirm explicitly that the perimeter analysis for staking will take into account whether custody of client assets transfers to the operator, whether the operator has discretion over the deployment of staked assets, and whether yield generation is deterministic and protocol-governed.
• Provide a clear interpretation that 'orders' in the arranging deals activity does not extend to unidirectional peer-to-peer transfers of qualifying cryptoassets or user-initiated smart contract interactions where no intermediary takes a position or exercises discretion.
• Confirm that LST issuance does not constitute dealing as principal, as the activity lacks the price formation, spread, and principal risk-taking that characterise the dealing activity under the RAO. Additionally, or alternatively, confirm that LSTs fall within the “solely a record of rights in another cryptoasset” exclusion from the qualifying cryptoasset definition, and therefore outside the new crypto regulatory framework. 
• Develop protocol-specific guidance — or at minimum a framework for protocol-specific analysis — rather than applying a uniform perimeter determination across architecturally distinct staking models.

Recommendations requiring HM Treasury engagement

The following issues require legislative action and we urge the FCA to engage HM Treasury accordingly:

• Introduce a statutory technical services exclusion for the arranging deals activity that covers provision of non-custodial software wallets, equivalent to the validator node exclusion for the arranging staking activity.
• Consider the appropriate regulatory response to the use of freely available, open source protocols 
• Consider a lighter-touch, disclosure-based regulatory tier  for non-custodial staking operators below a defined threshold of delegated assets under management, calibrated to the actual risks present rather than the full financial services authorisation framework.

Appendix A: Responses to Specific Consultation Questions

The following table maps our substantive arguments to the FCA's specific consultation questions set out in Annex 1 of CP26/13.

Appendix B: International Comparative Table — Staking Regulation

Appendix C: Note on Slashing Mechanisms

The following table summarises slashing parameters across major proof-of-stake protocols, illustrating the variability of technical risk profiles that a protocol-agnostic regulatory framework must accommodate.

The variation across protocols directly undermines the case for a uniform compliance framework. Capital requirements calibrated to Cosmos's 5% delegator slashing risk would be significantly over-cautious for Solana, where slashing risk is currently zero. A proportionate regulatory response requires protocol-level analysis.

8. Conclusion

We support the UK's ambition to develop a well-regulated, competitive cryptoasset sector. Regulation that addresses genuine risks — consumer fraud, market manipulation, the misuse of client assets by custodial intermediaries — is in the interests of UK consumers and of the sector. We do not oppose regulation in principle.

What we oppose is the application of a regulatory framework built for financial intermediaries with credit risk, custody risk, and informational opacity to activities that are architecturally incapable of generating those risks. Delegated staking on non-custodial protocols does not involve custody transfers. Non-custodial wallet software does not involve financial intermediation. LST issuance on transparent, auditable smart contracts does not create the hidden maturity transformation that banking regulation addresses.

The proposed perimeter guidance, if finalised in its current form, will not protect UK consumers from the risks present in these activities. It will instead eliminate UK participation in the infrastructure of public permissionless blockchain networks, deny UK consumers access to the services those networks provide, and cede the field to jurisdictions that have taken a more analytically precise approach to calibrating regulation to risk.

We urge the FCA to use all available discretion to narrow the proposed perimeter to activities where the regulatory framework genuinely addresses the risks present, and to engage HM Treasury on the legislative amendments necessary to give effect to a more proportionate regime. We remain available to provide further evidence or analysis in support of these submissions.