Australia’s regulatory treatment of staking has long been uncertain. A new legislative framework commencing 9 April 2027 finally provides statutory clarity – but understanding what applies now is just as important.
Need to know:
- Under ASIC’s Information Sheet 225 (INFO 225), custodial staking services that provide rights or benefits beyond direct staking (such as access to staking below minimum staking amounts) are likely financial products requiring an Australian financial services licence (AFSL).
- Amendments to the Corporations Act 2001 (Cth) (Corporations Act) introduce a dedicated ‘custodial staking arrangement’ exemption, removing qualifying staking services from managed investment scheme treatment from 9 April 2027.
- On-chain staking and qualifying liquid staking tokens are expressly placed outside the financial services regime under the new Act.
What is staking?
Staking is the process of locking digital assets to support a blockchain network. Validators commit assets as collateral to verify transactions, earn rewards for their contribution, and risk having a portion of their stake ‘slashed’ for misconduct or downtime. Staking rewards are better characterised as payment for work than as investment returns.
There are four main staking models: direct staking (running your own validator node on-chain); custodial staking (delegating through an exchange or service provider); staking pools (participants combine assets to meet minimum thresholds); and liquid staking (a derivative token represents your staked position, allowing you to earn rewards while maintaining liquidity).
On-chain vs custodial staking
On-chain transactions occur directly on the blockchain. In on-chain staking, the user retains their private keys. Delegation is effected through the blockchain protocol, the validator cannot transfer or spend the tokens, and rewards flow directly to the user’s wallet. The user retains day-to-day control throughout.
Custodial staking transactions occur outside of the main blockchain network. In custodial staking, tokens are transferred to a third-party service provider (typically an exchange) which holds the private keys and manages the staking process on the user’s behalf. Rather than interacting with the blockchain directly, the user relies entirely on the provider to perform the staking function, and the user has only a contractual right against the provider.
This distinction is legally significant, as the key financial product tests under the Corporations Act are dependent on whether the user has day-to-day control over their contribution and whether contributions are pooled by the operator.
ASIC’s INFO 225
INFO 225 was updated in December 2025 to give guidance on the application of the financial services regime to digital assets.
For staking, on-chain staking is generally not a financial product. Example 3 in INFO 225 addresses basic proof-of-stake staking with no intermediary providing added value. ASIC considers such arrangements unlikely to be a financial product.
For custodial staking the central question is generally whether the staking service amounts to an investment product of some kind, which will turn on whether it produces rights or benefits additional to, or different from, what the user would obtain by staking on-chain. Example 4 addresses managed staking as a service. Where an exchange’s service overcomes blockchain restrictions (for instance, allowing users to stake below the blockchain’s minimum balance or to withdraw during mandatory lock-up periods), ASIC considers the arrangement likely to be an investment facility and potentially a managed investment scheme (MIS). Where no such restrictions exist and the service provides no added benefits, it is unlikely to be a financial product.
The practical test for operators: what does your service provide that the user could not achieve independently? Meaningful added benefits trigger financial product characterisation, and therefore licensing requirements.
What changes under the new Digital Assets Framework
The new Act creates two new categories of financial product: digital asset platforms (DAPs) and tokenised custody platforms (TCPs).
A significant change is the introduction of the ‘custodial staking arrangement’ concept and its express exclusion from MIS treatment. A custodial staking arrangement must:
- be entered into through a licensed DAP
- expressly authorise the DAP operator to use the client’s assets for consensus activities on public digital token infrastructure
- pass on rewards (after fees) to the client
- benefit the client in at least one of the specified ways, being earlier return of assets, access to staking below minimums, slashing protection, or lower transaction fees.
Where these conditions are met, a DAP AFSL alone is sufficient – no separate MIS authorisation is required. The DAP authorisation is triggered by the fact the operator is holding the tokens.
Find out more on DAPs in our previous article: Digital asset platforms: Navigating Australia’s new digital asset regulation.
Liquid staking tokens: No longer derivatives
Previously, liquid staking tokens such as Lido’s stETH were treated by ASIC under INFO 225 as likely derivatives. The Act’s new wrapped token exemption removes this characterisation for qualifying tokens, provided the token is issued, and the underlying asset is held, by a TCP that holds an appropriate AFSL and the token holder has rights equivalent to those of a direct holder of the underlying asset.
What you should do now
The new framework represents a significant shift in how staking products are regulated in Australia, and with a commencement date of 9 April 2027, now is the time to consider whether and how these changes apply to you.
If you operate a platform that offers staking services, participate in staking as an investor, or advise businesses active in this space, it is worth reviewing your current arrangements against both the existing INFO 225 guidance and the incoming regime.
Hamilton Locke’s Funds and Financial Services team is advising clients across this sector on structuring, licensing, and preparing for these reforms.
For more information, please contact Jaime Lumsden.
