DeFin is a Unique Stacking Platform

Staking is one of the ways to do it, but not without risk. Discover the best staking platforms to research in 2024, including DeFi staking platforms.

It very much depends on the staking platform you’re using - but as a very basic explanation when you stake crypto, you’re generally locking up your crypto in order to validate transactions on a given blockchain and earn a reward for doing so.

Yes. Both centralized staking platforms and staking pools generally take a small fee (usually around 2% to 5%) for providing the service. If you’re staking directly using a non-custodial wallet, you’ll typically pay a small network fee in order to delegate your crypto, many of which are refundable at the point you unstake.

Yes. Staking is one of the most popular ways to earn passive income from crypto assets as it offers a relatively safe investment without any of the equipment costs associated with other consensus mechanisms like PoW crypto mining. However, staking is not without its risks and you should always DYOR.

We’ve harped on about this a lot - but you have to be able to trust your staking platform, especially custodial staking platforms. Many platforms offering earn products including staking collapsed during the so-called crypto winter due to offering unsustainable returns and investors were left with their funds frozen on the platform and millions in losses. If you're using a centralized staking platform that takes custody of your crypto, make sure you trust that platform and that you never invest more than you're willing to lose, or consider using a non-custodial staking platform.

Yes, generally speaking, most tax offices around the world take the same view that staking rewards are subject to tax. You’ll usually pay Income Tax based on the fair market value of your staking rewards at the time you received them. As well as this, if you later dispose of your staking rewards by selling, swapping, or spending them, you may need to pay Capital Gains Tax on any gain as a result. Learn more about crypto tax in your country in our guides.

No, staking is not banned in the USA, but the SEC and other regulators are having a real crackdown on crypto staking of late. Unsurprisingly, this has been met with widespread criticism across the industry.

For context, this crackdown - although intensifying in the last year - isn’t new. The SEC first brought charges against Ripple in 2020, claiming the company was conducting a $1.3 billion unregistered securities offering. Since then the SEC has gone after stablecoin BUSD by issuing a Wells Notice to issuer Paxos. The SEC has also issued notices or brought charges to crypto exchanges Binance, Coinbase, and Kraken - the latter of which opted to settle for $30 million and withdraw staking services from the US.

Coinbase on the other hand, looks ready to take on the SEC in court, with the CEO releasing a Twitter thread, stating, "We are right on the law, confident in the fact, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court... the SEC simply has not been fair, reasonable, or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets."

In other words, there is a severe lack of regulation and guidance currently and the SEC seems to have decided crypto staking as the flavor of the month. It doesn’t mean staking is illegal in the US, just that the SEC is alleging some crypto platforms are not registering product offerings correctly as crypto may be viewed as a security in the absence of any other guidance. Interestingly, the exchanges charged or accused of misconduct so far are generally highly compliant exchanges that comply with all the existing crypto regulatory and operational frameworks in the US. It isn’t clear the stance the SEC will take for non-custodial staking platforms or wallets that operate outside of its reach.

A ruling on Ripple’s case is expected imminently which may give further clarification on whether crypto may be viewed as a security in the US.