Why I Continue to “Stake” My Largest Holdings

by Apr 11, 2023Articles


If you are bullish about the long term potential of crypto, and we certainly are.

And if you plan to sit on your favourite coins for the long term, then you might consider “staking”.

Staking is one of the most popular ways to earn money in crypto.

It is a stress free way to grow your long term holdings without ever having to look at your screen, or time the market, or do any of the hard work that comes with trading a volatile asset.

Recently, staking has become a slightly controversial topic.

Regulators in the US are attempting to stamp out the practice.

But as I’ll explain, staking remains a very attractive way to profit from investing cryptocurrencies for UK investors.

What is staking?

In simple terms, when you stake your coins, you temporarily lend your coins to the blockchain network to support activity on that network.

Typically any assets you stake are locked in for a fixed period of time: say 60 or 90 days.

And while your coins are locked up, you are rewarded with a high interest APR as an incentive.

It’s not as safe as keeping your money in a bank.

Your capital is at risk and it’s not covered by the Financial Services Compensation Scheme (FSCS), which insures up to £85,000 of deposits in a bank or building society account.

But the rewards for staking are very attractive.

On Kraken, for example, you can stake a wide variety of coins.

You’ll earn an annualised yield of 7% for Ethereum and up to 20% for some of the smaller coins.

And if you are prepared to stake on more obscure platforms, the rewards can be even more generous.

I continue to stake several of my biggest holdings on Kraken.

The coins will be locked up for as long as I like – months, even years.

And when I finally choose to unstake my coins, I’ll have to wait a short period of time, but I’ll be able to recover of holdings having earned a very nice income in the process.

I’ll certainly get a better return than the yield on my bank count.

What the US crackdown means for staking

The slight wrinkle in this story is the threat of regulation.

In February, Kraken discontinued its crypto staking programme in the US and paid a $30 million settlement to the SEC.

The SEC claimed that Kraken failed to register “the offer and sale of its crypto asset programme.”

In the weeks that followed, the SEC tried to force other exchanges to shut down staking.

Some resisted.

Coinbase says that it will continue to offer staking services in the US and is preparing for a legal battle with the SEC.

That’s going to be a tough fight.

The thing is that none of this applies to what is happening in the UK, which has a softer stance on crypto.

So far, UK regulators have yet to provide a definitive stance on staking.

A recent consultation on crypto by the Treasury suggested that the staking might come under new regulation…but that the indications are that UK investors will be able to continue staking, and paying tax on that income you earn.

But as things stand, the guidance from HMRC is that the pound sterling value (at the time of receipt) of any staking rewards will be taxable as income, with Capital Gains Tax applied upon any disposal of the coins.

With the UK government seeking to establish London as a hub for cryptocurrencies, and the HMRC considering the sizeable tax intake, it looks as though UK investors will continue to enjoy a relatively favourable regulatory environment for crypto, at least compared to the US.

We’ll keep you updated on any changes to the outlook here.

The Key Takeaway

For now, staking looks a good way to boost returns on your crypto holding.

Staking works well for long term investors which you have no intention of trading, no matter how much the market fluctuates.

There are several risks when you stake your coins.

There’s regulatory risk, which we keep a close eye on.

There’s the risk of the provider, which could be hacked or even dishonest.

You can mitigate that risk by using a reliable exchange such as Kraken or Coinbase.

Recently, we undertook a comprehensive review of the best ways to stake your coins.

This review tells you everything you need to know to get started with staking: the best places to stake, the rewards, how to avoid the big risks.

This will help you develop a basic staking strategy so you can earn a decent return on coins, no matter what stage we are at in the cycle.

If you sign up for a free trial, you’ll be able to access the Staking Guide and see for yourself.

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