Sep 25, 2023

As part of CoinDesk's Staking Week, presented by Foundry, Proof of Stake Alliance executive director Alison Mangiero discusses the state of staking in the U.S. and abroad one year after the historic Ethereum "Merge."

Video transcript

It's staking week at Coindesk presented by Foundry and we're taking a closer look at the state of staking one year after the merge. We should note that Foundry and Coindesk are both owned by DC G. Joining us now is proof of stake Alliance. Executive director Alison Mano. Welcome to the show, Alison. Thanks for having me. All right, let's talk about the proof of stake Alliance. So what do you do there? What is the organization's mission? Yeah. So Proof of Stake Alliance is a trade association. We are laser focused on the staking space and we work to basically advocate for public policies that would foster innovation um in the proof of stake space. What's that experience been like for you in the US? In our last segment, we talked a lot about legislation or lack thereof. There's a big focus on uh you know, stable coins where does staking fit in to the conversation here. So it's interesting, I think we've seen a lot more attention being paid to sta staking over the past year. Um Fortunately or unfortunately, a lot of that has come out of the agencies, right. So I think many people started paying attention to staking um earlier this year when we saw the cracking settlement and sec with then the enforcement actions against coin base and finance. So we're seeing some of the agencies more focused on staking. Also, there have been some positive uh movements in the market structural legislation. For example, we saw that validators and those who were involved in validating transactions on proof of stake network staking as a service providers were viewed as offering ancillary services, which is how we would characterize them. So we're seeing bits and pieces but much more attention being paid to staking and staking as service providers. Um This year than, than in previous years, you brought up the uh crack in settlement. They of course paid a $30 million fine to the SEC and agreed to shut down their staking as a service program earlier this year. Um Talk, talk to us about any progress that's been made there. Have you or anyone from your organization had any conversations with the SEC? And what does that mean for staking in the US? I think it's important to actually look backwards a little bit. So in 2020 when some of the first natively proof of stake blockchains were coming online and some of the first staking as a service providers were starting to commercialize their service. We as an organization had had some very productive meetings with SEC and came up with some principles for staking as the service providers and those who are going to be active in this space so that they were describing their services, technical services accurately, what we saw with the crack and settlement and I won't get into the particulars there. Um Is that in her dissent and her statement on uh in in that settlement, commissioner said that look, solutions need not necessarily come from a regulator. We as industry can come together and come up with some sensible principles that we can use to govern ourselves. So we at posts have been focused on that. From the beginning, we continue to be focused on that. We'll be updating those principles since thinking has obviously evolved um since 2020. So that's what we've been focused on in, in the wake of the crack and settlement. Some of the other actions that we've seen this year. Don't we need some clarity from a regulator though, to avoid firms having to pay these $30 million fines and, and investing in setting up services that they then have to shut down. Look, I'm fond of saying there's regulatory clarity and then there's regulatory clarity, right? I think we need to do the hard work of educating lawmakers and regulators so that we can ensure that the clarity that we get is appropriate. Um But I do agree that yes, obviously, it would be much better if, when uh an agency says they need to come in and register, it was clear what that means exactly. Um, and how one would go about doing that successfully. We've had a little bit, um, uh, we, we spoke about this a little bit in the last segment. The, the idea of the US versus the rest of the world do a little bit of a compare and contrast for me on the state of staking in the US versus some other jurisdictions on, on the globe that have a little bit more clarity. Listen, I think the important thing here is there's, there's no lack of things to focus on here in the US and that's where we post a tens of focus. Uh What I will say is what we're seeing is especially we just talked about cracking, they halted their staking as a service operations here in the US, but still very much ongoing in other parts of the world. And so what I think we need to make sure is that these, obviously these systems and these blockchains are global and we need to make sure that Americans have the same access to those blockchains and participating in securing those blockchains as people in other jurisdictions have. Um So I do think we're seeing more positive um movement in other jurisdictions. Um We'll have to see what happens here in the US, but I think it's really a shame that we can't continue to be a global leader here at home. Uh You know, last year, the SEC suggested that transitioning to proof of stake might make ether a security. Uh Has there been any movement on uh that discussion? So I think we're talking about two different things and I think it's important to keep that in mind and, and preface any discussion of whether or not either there is a security. We're talking about two different things. There's one discussion which is when we were just having, which is whether certain arrangements, certain staking arrangements constitute a security. And the second is whether an underlying token is a security. And so last year, around the time of the merge, we started to see um Gary Gusler make statements that transitioning from proof of work to proof of stake might make either a security and that kind of conflating and trying to draw a straight line from some of the crypto lending programs that we've seen to staking. Um So that's one thing I think that we have to keep in mind that any securities analysis that you're going to do, there's on, on in one hand, the staking arrangement and then on the other hand, the nature of the underlying token, but no, uh to answer your question, we haven't made any movements. Um There was a, a very tense exchange between um mchenry and Gensler when he testified in front of Congress where he's straightforward and he asked him is, is Ether a security and, and Ginzler refused to give a straight answer saying that that um would pertain to particular facts and circumstances. Do you think there's a future for a future for staking here in the US or do you think there's some time before we see staking executed successfully? I think there needs to be a future for staking here in the U SI. Don't I think, look, if you're talking about anything other than Bitcoin today that matters, you're talking about proof of stake. And so we need to reclaim the narrative. We need to describe what staking is accurately. There's a great piece by consensus that I refer to all the time that the headline is staking is data validation, not investment. I think once we get back to basics and we can define our terms um and educate again, lawmakers and regulators about what staking truly is. I think we can be successful, but I think we have to do the hard work and I think all of the participants in these proof of stake ecosystems have to be willing to do the hard work with us. It's not just groups like OSA. If you had to put a timeline on regulatory clarity for staking, how long do you think it's gonna be uh until we get that? I wish I could answer that question. I don't have a crystal ball. Um But I do think that we're going to be talking about these issues for beaters to come. All right, Alison, thanks so much for joining the show this morning and Happy Monday. Happy, happy Monday to you. Thanks for having me. That was proof of sake. Alliance executive director, Alison Manero.

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