An ADGM Regulatory Review: When Staking Stops Being a Product Feature and Becomes a Regulated Client Service > NEWS

by Soham Jethani and Rhea Shah

Staking is often presented as a feature that a virtual asset business can simply switch on. Legally, the position changes when the business moves from staking its own assets to providing a service using assets that belong to customers.  The technology may look similar in each case. Regulatory treatment in Abu Dhabi Global Market (ADGM) may differ significantly.

What staking involves

A blockchain is a shared digital record. On some networks, validators confirm transactions and help secure the network. To participate, a validator commits, or “stakes”, virtual assets under the network’s rules. Good performance may earn rewards; breaching those rules may cause some assets to be lost, commonly through “slashing”. A customer can participate directly or use a provider to perform the technical work.

Staking the firm’s own assets

When a firm stakes assets it owns, makes the decisions, and keeps the rewards, it is using its own balance sheet. No customer contributes property or shares in the return.

Once customer assets are used, the firm must ask two separate questions: does the arrangement amount to a collective investment fund; and, even if it does not, is the firm providing a regulated client service?

When staking begins to resemble a fund

Section 106 of the Financial Services and Markets Regulations 2015 sets a substance-based test for a collective investment fund. In simplified terms, a fund may exist where customers participate in arrangements involving property and share in profits or income from it; they do not exercise day-to-day control over its management; and their contributions and returns are pooled, and the property is managed as a whole. ¹

Think of separate lockers and a common pot. If each customer’s assets are separately staked and the rewards attributable to those assets belong to that customer, the arrangement may look like a series of individual services. If the provider combines customer assets, manages them as one position and divides the rewards, the arrangement is more likely to resemble a fund. Separate balances on an internal screen do not settle the question if the assets are pooled or managed collectively underneath.

Two different things are in play here, and firms should not conflate them. Segregation at the client-ledger level (separate records, calculations and entitlements for each customer) is not the same question as pooling at the delegation level, where assets are combined on-chain or through a service provider and staked as a single position. A firm can satisfy the first while doing the second. For fund analysis, what matters is whether ledger segregation is genuine and reflects real, individually calculated entitlements, rather than a presentational layer over property that is, in substance, managed collectively.

Why decentralisation matters, but is not a shortcut

Native staking may take place directly through a decentralised blockchain protocol. Participants commit virtual assets to help operate or secure the network, and the protocol determines how it generates rewards. No central person may pool participants' assets, manage them as a single portfolio, or exercise day-to-day control over the arrangement. These features are relevant when considering whether the arrangement is a collective investment fund under section 106.

However, the use of a decentralised blockchain does not settle the question. The customer-facing product may still be centrally managed even if the underlying network is decentralised. For example, a provider may decide which assets are staked, combine customer assets, select validators, control withdrawals and calculate how rewards are allocated.

The analysis must therefore focus on how the arrangement operates in practice. The degree of decentralisation is relevant, but it does not replace the statutory test under section 106.

The specific exclusion for regulated client staking

Since 29 April 2026, the ADGM Fund Rulebook has contained a targeted exclusion. An arrangement is not a fund where an ADGM-authorised firm establishes it to facilitate staking of virtual assets belonging to its retail or professional clients. The exclusion is deliberately tied to staking as the rules define it: using customer assets under a distributed-ledger network or protocol to operate the network or support its economic or operational security in exchange for rewards. It can include use of an external staking provider. ²

The definition excludes returns earned primarily from liquidity provision, lending, trading, price movements or promotional incentives. A product does not enter the exclusion merely because it is marketed as “staking”. The source of the return and the actual use of the assets are decisive. ³

If the exclusion does not apply, the arrangement is not automatically a fund. The firm must return to section 106, consider any other applicable exclusion and assess the product as a whole.

Not a fund does not mean unregulated

The fund exclusion answers only the fund-classification question. The Conduct of Business Rulebook separately governs how an authorised firm may stake customer assets.⁴

A firm permitted to provide custody or manage assets may stake on a customer’s instructions. Only a firm permitted to manage assets may decide, using its own discretion, whether to stake the customer’s assets. A custodian can therefore carry out the customer’s decision; custody permission alone does not allow the custodian to make that decision for the customer.⁵

Before providing the service, the firm must notify the Financial Services Regulatory Authority of its intention to do so. The current rules restrict the assets that may be staked and the form of rewards. They also require the firm to give prescribed key terms and risk disclosures before staking; provide current information about staked assets and rewards; allow the customer to terminate the arrangement; and, where an external provider is used, conduct due diligence and enter into an appropriate written agreement.⁶

That disclosure obligation is not satisfied merely because a fee exists somewhere in the structure; how it is presented matters too. A margin embedded within a reduced headline rate of return, rather than itemised as a separate charge, may leave a customer unable to identify what is being deducted or by whom. Firms should treat fee presentation, not merely fee existence, as part of what the prescribed key terms and risk disclosures must cover.

Termination may not produce immediate access because a network can impose an 'unbonding' period during which the assets remain locked. The firm should explain that period, slashing risk and the allocation of rewards and fees before the customer commits. Outsourcing the technical work does not outsource the authorised firm's regulatory responsibility.

The wider framework still applies

Where the firm holds or controls customer assets, it must also consider the ADGM custody rules. The firm should be able to identify customer assets, maintain records and reconciliations, protect wallets and explain what happens if it or an external provider fails. Governance, technology risk, operational resilience, anti-money laundering, sanctions and prudential requirements may also apply. The staking rules are an additional layer, not a replacement for the wider framework.

The practical dividing line

A firm assessing a staking product should ask:

• Who owns and controls the assets?
• Who decides whether, where and how they are staked?
• Are customer positions truly separate or pooled or managed as a whole?
• How are rewards and losses calculated and attributed?
• Does any return come from lending, trading, liquidity provision or another strategy?
• How decentralised is the protocol in practice, and what remains centrally controlled by the provider?
• Who holds the assets and private keys, and what happens on failure?

Staking stops being merely a product feature when a firm begins using customer assets to provide a service. At that point, the fund perimeter, the firm's regulatory permissions, the staking conduct rules and the wider custody framework must be considered together. In ADGM, the answer follows what the product actually does—not what it is called.

Disclaimer

This article is for general information only and does not constitute legal, regulatory, tax, financial or other professional advice. Readers should not act, or refrain from acting, based on this article without seeking advice from suitably qualified counsel on their specific circumstances.

Septten Advisors is a UAE-registered legal consultancy advising founders, investors, technology companies, financial services businesses and virtual asset market participants on legal, regulatory, transactional and strategic matters. The content reflects our general views as at 7 September 2026 and may not reflect later legal, regulatory or market developments. No advisor-client relationship is created by reading this article. To the fullest extent permitted by law, Septten Advisors accept no liability for any reliance placed on it.

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1. Abu Dhabi Global Market, Financial Services and Markets Regulations 2015, section 106(1)–(5),https://en.adgm.thomsonreuters.com/rulebook/106-collective-investment-funds(accessed 4 September 2026).

2. Abu Dhabi Global Market, Fund Rulebook, rule 2.1.20,https://en.adgm.thomsonreuters.com/rulebook/funds-2120;Glossary Rulebook, rule 1.2, definitions of “Staking”, “Rewards” and “Staking Service Provider”,https://en.adgm.thomsonreuters.com/rulebook/glo-12-defined-terms;and ADGM, “ADGM FSRA Finalises Regulatory Framework for the Staking of Virtual Assets”, 29 April 2026,https://www.adgm.com/media/announcements/adgm-fsra-finalises-regulatory-framework-for-the-staking-of-virtual-assets(all accessed 4 September 2026). The rule refers to an Authorised Person, Clients, Staking and Virtual Assets as defined in the ADGM framework.

3. Abu Dhabi Global Market, Glossary Rulebook, rule 1.2, definition of “Staking”, paragraphs (d) and (e),https://en.adgm.thomsonreuters.com/rulebook/glo-12-defined-terms(accessed 4 September 2026).

4. Abu Dhabi Global Market, Conduct of Business Rulebook, rule 17.10.1,https://en.adgm.thomsonreuters.com/entiresection/8841(accessed 4 September 2026).

5. Abu Dhabi Global Market, Conduct of Business Rulebook, rule 17.10.3,https://en.adgm.thomsonreuters.com/rulebook/cobs-17103(accessed 4 September 2026).

6. Abu Dhabi Global Market, Conduct of Business Rulebook, rule 17.10.2,https://en.adgm.thomsonreuters.com/rulebook/cobs-17102;and rules 17.10.4–17.10.7,https://en.adgm.thomsonreuters.com/rulebook/cobs-17104, https://en.adgm.thomsonreuters.com/rulebook/cobs-17105, https://en.adgm.thomsonreuters.com/rulebook/cobs-17106andhttps://en.adgm.thomsonreuters.com/rulebook/cobs-17107(all accessed 4 September 2026).