As the crypto space comes to terms with the renewed regulatory scrutiny around staking activities, Cardano (ADA) founder Charles Hoskinson has shared a model that could align with legal requirements.
According to Hoskinson, operators in the space can consider the contingent staking model that centers around know-your-customer practices, he said during a webcast on February 10.
Under the model, Hoskinson noted the transaction certificate would be two-sided, meaning that both the delegate and the staking pool operator would have to sign the transaction before it is processed. Notably, under the current staking model, when an individual wants to delegate their stake to a pool, they send a transaction to the pool.
At the same time, with contingent staking, the process is different since the transaction would be pending until both the delegate and the pool operators have signed it. In this line, pool operators would have the opportunity to consent to the delegation before it takes place.
“It is an interesting question about starting to change staking models to accommodate regulatory nuances. <…> You can introduce a concept of contingent staking, and basically, it’s two-sided. <…> This changes a push non-consensual relationship to a bilateral consensual relationship,” he said.
Complying with legal requirements
Furthermore, Hoskinson believes that with contingent staking, pool operators would be able to choose who they want to delegate to, which could help them better comply with regulatory requirements.
During the webcast, Hoskinson hinted that the Cardano community plans to write the necessary documents to introduce the concept. The papers would serve as a work product for the Cardano community and outline how contingent staking would work in practice.
His sentiments come after the United States regulator, the Securities Exchange Commission (SEC), reached a settlement with crypto exchange Kraken over the platform’s staking operations. Part of the deal will see Kraken suspend its staking services in the U.S.
Indeed, the SEC’s latest directive has resulted in criticism from the crypto space, with the agency facing accusations of attempting to stifle the sector’s growth. However, chair Gary Gensler has dismissed the notion noting that the SEC is guided by the need to protect investors.