Liquid Staking Tokens, Bank Readiness, and Decentralised Assets: Key Insights from Our EthCC Cannes Roundtable

On March 30, the MiCA Crypto Alliance convened a closed-door Policy Roundtable during EthCC Cannes, bringing together legal, compliance, and digital asset infrastructure leaders to discuss two critical areas under MiCA: the classification of decentralised assets, and the evolving role of banks in digital asset markets.

Hosted in collaboration with the Tezos ecosystem as part of TezDev, the roundtable was designed as a curated session to move beyond presentation into discussion and testing ideas across industry and regulatory perspectives. Rapporteur notes for the session were taken by Diana Stetiu, MiCA Crypto Alliance Ambassador.

Opening Remarks: The Evolution of the MiCA Crypto Alliance

The session opened with remarks from Aaron Sanchez, our Director of Industry Engagement, who framed the Alliance’s work through a three-phase trajectory: where it came from, where it stands today, and where it is heading.

He described the origins of the Alliance as a research-driven effort. Early work focused on how crypto-assets could meet Europe’s expectations around transparency, responsibility, and credible disclosures, anticipating many of the requirements later formalised under MiCA.

Today, that research has translated into practical infrastructure. The Alliance supports issuers, exchanges, and service providers in meeting MiCA requirements through the preparation of MiCA-compliant white papers, ESG and sustainability disclosures, and standardised documentation aligned with the regulatory framework.

At the same time, the Alliance is increasingly positioned as a standard-setting and convening body. Initiatives such as the taxonomy work on decentralised assets and liquid staking tokens reflect a broader effort to develop shared frameworks for assets that do not fit neatly within existing regulatory categories.

Looking ahead, the focus is on strengthening collaboration between academia, industry, and regulators. The objective is to create a pipeline where research informs practical tools, and those tools in turn support structured dialogue with supervisors and policymakers. The upcoming Future of Banking & Digital Assets Roundtable in Brussels is a preview of that future: a closed-door conversation with banks, regulators, and CASPs on how MiCA and digital assets are being integrated into banking strategies, governance, and reporting.

Keynote: Tokenising Uranium as a Real-World Asset

The keynote, delivered by Ben Elvidge, focused on the development of a tokenised uranium product, offering a concrete example of how real-world assets can be structured on-chain under real operational and regulatory constraints.

The presentation addressed challenges faced by earlier tokenisation initiatives in the uranium market, which had drawn criticism for relying on estimated or unextracted reserves. These approaches led to questions around credibility and transparency, and continue to shape how such projects are perceived today.

In contrast, the current model is based on physically acquired uranium compounds that are stored and supported by reserve statements. This distinction was presented as central to addressing industry concerns and establishing a more robust foundation for tokenised commodities.

At the same time, the project highlights the operational realities of real-world asset tokenisation. It remains dependent on traditional financial and industrial systems, and involves ongoing storage and maintenance costs. To cover these, the protocol introduces a mechanism to mint additional tokens on a pro rata basis, funding storage and operational expenses.

Overall, the keynote illustrated both the potential and the complexity of bringing real-world assets on-chain, particularly where physical infrastructure, verification, and cost structures must be integrated into token design.

Panel 1: Regulation of Liquid Staking Tokens and Decentralised Assets

The first panel focused on the classification of liquid staking tokens (LSTs), using them as an entry point to explore broader questions around the legal treatment of decentralised assets.

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Framing the Problem: Legal Classification of LSTs

The panel opened with a framing from our General Secretary, Juan Ignacio Ibañez, who introduced LSTs as a case study to examine broader challenges in the legal classification of decentralised assets.

He noted that this issue had been raised several months earlier during the DARTE Roundtable Vienna 2.0, hosted by BlackVogel. Participants highlighted a growing operational challenge: exchanges do not have a consistent way to classify LSTs under EU law, and this uncertainty extends beyond LSTs to other tokenised asset structures.

To ground the discussion, Juan outlined how LSTs function. Users pool assets into a smart contract to participate in staking and receive a transferable token representing their position, which can later be redeemed for the underlying asset. These structures are now expanding to proof-of-stake blockchains, including models where a centralised party manages deposited assets and distributes returns. In such cases, they may exhibit characteristics more closely aligned with financial instruments, rather than simple staking receipts.

The regulatory challenge arises from the fact that existing frameworks were developed before staking became a dominant activity in decentralised finance, and do not fully accommodate decentralised and semi-decentralised structures. As a result, LSTs may fall under multiple regimes, including MiCA, MiFID II, or AIFMD, each carrying different compliance implications. He also noted that while LSTs could be interpreted as referencing an underlying asset, MiCA’s asset-referenced token category is closely tied to stable value and payment use cases, making this classification difficult to sustain in practice.

Juan also highlighted emerging regulatory interpretations, including distinctions between claims against an issuer (“in personam”) and claims against underlying assets (“in rem”), which may lead to different classification outcomes. This creates a paradox, where more decentralised structures, by shifting claims from issuers to underlying assets, may be interpreted as closer to traditional financial arrangements such as collective investment structures.

A key issue is legal uncertainty. Even where market participants develop internal classification approaches, these may later be challenged by regulators, including through retroactive reclassification. He noted that this creates significant risk for exchanges and service providers, who may comply in good faith but still face liability if regulatory interpretations evolve over time. He also raised a pointed concern: that proactively seeking regulatory guidance is not without risk. The industry might receive clarity, but in the form of an unfavourable classification, one that imposes disproportionate constraints on market infrastructure regardless of whether it reflects the economic reality of how these systems operate.

In response, the MiCA Crypto Alliance initiated a coordinated research effort to address this gap. Following calls from industry participants, the Alliance formed a working group bringing together exchanges, banks, and other market participants to develop a structured classification framework for decentralised assets. The work began with the development of a classification framework for decentralised assets, followed by review and input from legal experts. Building on this, the Alliance published an interim report focused on LSTs, opening the analysis to industry feedback and further refinement.

‍Perspectives from Panellists‍

The discussion brought together perspectives from across the ecosystem, including Johannes Kern (Frankencoin Association), Alex Liu (Tezos Commons), and Mark Richardson (Bancor), reflecting legal, stablecoin, and decentralised finance viewpoints.

Johannes Kern shared insights from Switzerland, where regulatory approaches, while formally outside MiCA, increasingly align in practice with European frameworks. He raised questions around how the degree of decentralisation affects regulatory treatment, including concepts such as “profit decentralisation” and the design of highly decentralised DeFi systems.

Alex Liu contributed a US legal perspective, drawing on his experience in securities law and ongoing developments such as the Clarity Act. He highlighted the continued uncertainty in the US framework, as well as increasing efforts by regulators to align approaches across jurisdictions. The US classification of assets can broadly be regarded as comparable to the European approach, although with less emphasis on asset classification and a greater focus on contracts, promises, and the efforts of others. Alex highlighted a key particularity of the American system: its legal framework is beginning to allow for project evolution, from a centralised financial instrument to a decentralised digital commodity. Juan noted that this approach primarily addresses the treatment of layer-1 native assets as securities, which has been less of an issue in the EU, where such assets have generally not been subject to the same classification.

Mark Richardson provided a protocol-level perspective based on his work at Bancor, one of the earliest decentralised finance projects. Drawing on his role in designing automated market maker mechanisms, he highlighted how token design and underlying market structures influence both economic behaviour and regulatory interpretation.

What Does a Token Represent?

A central theme of the discussion was that tokens should not be understood purely as representations of underlying assets.

Panellists argued that, in many cases, tokens represent an activity, such as staking or liquidity provision, rather than a static claim on reserves. This distinction is important because it shifts the focus from the token itself to what is being done with the underlying assets.

In the context of liquid staking tokens, this distinction becomes particularly important. As discussed during the panel, users are not simply depositing assets and receiving a passive receipt. Instead, assets are actively deployed within the protocol, and the token represents a claim on future outcomes subject to protocol rules. This has led to comparisons with option-like or forward-looking instruments, highlighting that LSTs may exhibit characteristics typically associated with financial instruments, which contributes to ongoing classification challenges under existing regulatory frameworks.

This perspective also complicates the notion of an “issuer”. Where value is generated through ongoing activity and coordination, responsibility may not rest with a single identifiable entity. Instead, it may be distributed across multiple actors involved in managing or influencing the system. As noted during the discussion, this aligns with frameworks such as AIFMD, where those managing pooled assets may themselves fall within scope as regulated actors.

Token-Centrism, the Concept of “Security” and Legal Remedies 

Building on this, the panel questioned whether the token itself is the relevant object of regulation.

Mark Richardson argued that, in many cases, the token may be the least important component of a project, with economic value being generated, and sometimes extracted, through different paths. He went further, raising one of the more provocative questions of the panel. If there is a security embedded in a liquid staking structure, perhaps it is not the token at all. Instead, the "security" may be the blockchain's consensus mechanism itself, where users commit assets and the network rewards them with more assets and fees. He noted that if this logic holds for proof-of-stake, it may equally apply to proof-of-work, where miners invest capital and effort in expectation of network rewards. No regulator, he concluded, currently has a clear and principled definition of where that boundary lies.

Juan agreed, noting that MiCA regulation includes both crypto-asset regulation and crypto-asset “services” regulation. Alexandra Lloyd added a grounding observation: beyond any need for crypto-specific frameworks, there is always a centuries-old body of law available to rely on, a reminder that existing legal traditions are not without tools, even in novel contexts.

Overall, questions were raised about whether traditional concepts of securities can be meaningfully applied to decentralised systems, and where the boundary between regulated and unregulated activity should be drawn.

Regulatory Perspectives Across Jurisdictions

Alex Liu shared insights from the US regulatory landscape, noting that classification continues to rely heavily on the Howey test and may evolve over time as systems become more decentralised.

He emphasised that the presence of yield alone does not automatically result in a security classification, and that regulators increasingly focus on the overall economic reality of a structure rather than its formal characteristics.

At the same time, he highlighted that regulatory uncertainty remains a defining feature in the US, particularly as interpretations may shift over time. This creates a practical challenge for builders, who must operate without clear or stable guidance. On the other hand, this uncertainty can sometimes be innovation-enabling, as it provides more flexibility than a rigid taxonomy. Mark Richardson noted that once rigid boundaries are defined, malicious actors may actively build around those boundaries, whereas more flexible approaches can use that uncertainty to mitigate this.

Comparisons with the EU framework suggest a more classification-driven approach under MiCA, although the discussion noted that European regulators also apply a “substance over form” analysis and may revisit classifications as systems evolve.

Decentralisation and Control in Practice

A recurring point of agreement was that decentralisation is not a binary condition, but a multi-dimensional property.

Even where smart contracts are immutable or governance tokens are widely distributed, identifiable actors often continue to influence outcomes through infrastructure, coordination, and communication. This includes maintaining interfaces, shaping governance discussions, and supporting ecosystem development.

As a result, on the one hand, focusing solely on the moment of token issuance can be misleading. Regulators may instead consider where effective control or influence resides over time. On the other hand, MiCA specifically focuses on issuance for its Title II-IV exemptions, making focus on minting unavoidable. The MiCA Crypto Alliance taxonomy framework prioritises different dimensions for decentralisation in different contexts, such as redemption control and yield mechanics control.

Governance, Design, and Regulatory Outcomes

The panel also highlighted the role of governance and system design in shaping regulatory interpretation.

Johannes Kern emphasised that decentralisation should be assessed across multiple dimensions, rather than through a single metric. He pointed to governance mechanisms as a critical factor, noting that even widely distributed tokens can result in concentrated decision-making if participation is low.

Mark Richardson illustrated this tension with a concrete example from Bancor's own history. During the 2020 market crash, Bancor needed to recapitalise by minting new tokens and auctioning them to the community. A design flaw in the auction mechanism allowed a participant to submit a zero bid, and because no minimum had been set, that participant acquired approximately $5.5 million worth of tokens for free. With no central authority able to override the protocol, the DAO entered a crisis that had to be resolved through community coordination alone. Members committed time and capital collectively, and the protocol recovered, though slowly and inefficiently. Mark reflected that, although painful, the episode illustrated what genuine DAO behaviour looks like under stress. It also showed how, over time, some systems that began as highly decentralised have evolved toward more structured models, as the operational costs of pure decentralisation become apparent.

Johannes highlighted how governance rules compound over time, which can make DAOs hard to navigate and create pockets of decentralisation. To mitigate this, he illustrated how, in the Frankencoin ecosystem, anybody can submit a proposal, but decentralisation is ensured by widely distributed veto powers.

These discussions reinforced that mechanism design is not only a technical consideration, but also a regulatory one, as it directly influences how systems may be assessed in terms of investor protection, market integrity, and financial stability.

Panel 2: The Future of Banking from the Crypto Perspective

The second panel shifted focus to the evolving relationship between banks and digital asset markets under MiCA, examining how institutions and crypto-native participants are navigating new questions around compliance, market access, and financial infrastructure.

Framing the Problem: Bank Readiness Under MiCA

The discussion opened with Juan Ignacio Ibañez presenting findings from the MiCA Crypto Alliance’s Future of Banking and Digital Assets initiative, a structured research effort combining a survey and targeted interviews with European financial institutions.

The initiative examines how banks are preparing for the integration of digital assets under MiCA, including readiness for digital asset activities, potential CASP licensing requirements, adaptation of compliance processes, alignment with emerging regulatory frameworks, and the evolving dialogue between banks, regulators, and digital asset market participants.

Based on survey responses and interviews conducted with compliance teams, executives, and digital asset units, the research provides a detailed view of how institutions are approaching digital asset adoption in practice.

A key finding is the gap between perceived and actual readiness. While many banks consider themselves well-prepared and sufficiently staffed, interviews revealed significant capacity gaps, particularly in areas such as token listing due diligence, auditability, and internal expertise and training needs.

Banks showed strongest interest in stablecoins, tokenised securities, and custody services, while institutional DeFi attracted less practical engagement than expected.

Perspectives from Panellists

The panel brought together Alexandra Lloyd (YouHodler) and Yves Holenstein (Bitcoin Suisse), representing compliance and custody perspectives across the digital asset ecosystem.

Alexandra Lloyd contributed a compliance-focused view, drawing on her experience in anti-money laundering and regulatory frameworks. Yves Holenstein provided insights from custody and staking infrastructure, highlighting practical implementation challenges in aligning crypto services with banking, payments, and infrastructure requirements.

Sanctions Screening and the Limits of Current Compliance

Sanctions screening emerged as the most widely adopted compliance filter, used by 83% of institutions, reflecting the relative maturity of blockchain analytics tools and the availability of structured on-chain data.

However, Alexandra Lloyd cautioned that framing sanctions screening as the primary challenge can be concerning, as this is a relatively better understood area, with a large number of providers in the market. Excessive focus on sanctions only could lead banks to underestimate more complex and unresolved areas of crypto compliance. These include defining market abuse in crypto markets, establishing disclosure standards, and addressing insider trading risks, particularly in environments where communication increasingly takes place through social media and other informal or decentralised channels.

She also noted that crypto-native exchanges often operate more advanced crypto-specific compliance systems than banks, reflecting the higher level of scrutiny under which they already operate.

Yves Holenstein provided additional nuance, emphasising that even sanctions screening presents practical difficulties. One of the most telling illustrations was the question of transaction "hops": how many steps back in a wallet's transaction history should an institution investigate before considering a counterparty clean? There is currently no agreed answer, and different analytics providers will return different risk scores for the same address. Key questions remain unresolved, including the selection of analytics providers, how far back transaction histories should be analysed, how to interpret conflicting risk scores, and where to define acceptable risk thresholds. The absence of standardised methodologies, combined with regulatory expectations to use multiple providers, continues to create uncertainty in implementation. This reinforces the need for clearly documented and explainable processes that can be justified to regulators and internal risk teams.

The Vendor Gap and DORA Constraints

A significant portion of the discussion focused on the impact of the Digital Operational Resilience Act (DORA) on both banks and crypto service providers. Panellists were direct on this point: DORA may become the main barrier to institutional adoption of digital assets, not because of its intent, but because of the structural mismatch it exposes between what banks require from vendors and what the current crypto ecosystem can deliver.

Panellists highlighted a structural mismatch between banking expectations and the current maturity of crypto vendors. While banks require robust documentation, service level agreements, governance frameworks, and cybersecurity procedures, many crypto-native providers still operate with less formalised processes.

At the same time, traditional financial vendors would also face challenges under full DORA scrutiny, suggesting that the issue is systemic rather than sector-specific.

This creates a bottleneck for adoption, compounded by a shortage of professionals who can bridge cybersecurity, regulatory, and technical requirements. Institutions are increasingly establishing dedicated vendor risk management functions to address these challenges. 

The discussion also surfaced a practical framework for navigating this environment: the concept of a "Minimum Compliant Product." Rather than gold-plating every process or building extensive internal bureaucracies, the recommendation is to implement only what is genuinely necessary to be compliant, ensuring that policies are realistic, auditable, and operationally feasible. The key discipline is not the scale of the compliance apparatus, but the demonstrability(“paper trail”) of how processes are actually put into practice, built through early co-creation between operational and compliance teams.

Strategic Tension: Risk, Regulation, and Opportunity

Despite operational and regulatory challenges, banks increasingly view digital assets as strategically important.

A recurring theme in both the research and the discussion was that the primary risk is not necessarily engaging with digital assets, but failing to do so. Several institutions identified “not being there” as a key strategic concern, particularly among wealth management banks seeking to retain client assets. While, admittedly, there is a selection bias (banks not interested in digital assets would have not engaged in the initiative), for participating banks the panellists highlighted that they see a competitive threat in high net worth individuals choosing to deposit their wealth in stablecoins and selecting non-bank custody providers.

At the same time, broader regulatory frameworks continue to constrain participation. Basel classification rules, including the distinction between Group 1 and Group 2 assets, capital requirements, and licensing uncertainty limit the ability of banks, particularly smaller institutions, to engage meaningfully with digital asset markets.

Across the discussion, panellists emphasised that banks prioritise certainty, standardisation, and clearly defined regulatory expectations when evaluating digital asset activities.

Panellists also raised the challenge of continuous market infrastructure, including whether banks are equipped to support 24/7 settlement and real-time risk management, in contrast to traditional operating models.

Operational Complexity and the Need for Standards

The panel also highlighted the growing operational complexity of compliance.

Banks and service providers must navigate overlapping regulatory frameworks, including MiCA, DORA, PSD2, and data protection requirements. In particular, the classification of public blockchain addresses as personal data by European data protection authorities introduces additional compliance burdens and misalignment between legal, compliance, and technical teams. This burden is particularly pronounced for smaller firms, where limited teams must manage extensive documentation, multiple service agreements, and complex risk management requirements.

Panellists emphasised that many of the remaining challenges are no longer technical, but organisational and procedural. These include defining acceptable compliance methodologies, building audit-ready processes, and ensuring that policies are both effective and operationally feasible.

Towards Practical Implementation

Across the discussion, a consistent message emerged: regulatory interpretation and practical implementation must advance together, not sequentially. Defining compliance methodologies, building audit-ready processes, and aligning policies with real-world system constraints are not downstream activities, they are part of the interpretive work itself.

This requires more mature vendor ecosystems, better training, stronger internal expertise, and clearer common standards for compliance processes. Panellists also stressed the importance of ongoing dialogue between banks, regulators, and crypto-native firms to ensure that regulatory objectives can be met without undermining innovation. Both Alexandra and Yves underscored the role of initiatives such as the MiCA Crypto Alliance in providing the research foundation for cross-industry best practices in ambiguous legal areas, with lending identified as a priority for future work. The foundational question in crypto-banking is no longer whether to engage, but how to build the organisational infrastructure to do so responsibly.

Conclusion: From Discussion to Implementation

The roundtable brought into focus a tension that runs through both panels: regulatory frameworks are being asked to govern structures they were not designed for, and the industry is now deep enough into implementation to feel exactly where the gaps are.

On liquid staking tokens, the challenge is classification itself, where existing categories do not map cleanly onto decentralised structures, and where the most technically sound designs can paradoxically attract the heaviest regulatory treatment. On banking, the challenge is operational, where willingness to engage with digital assets is running ahead of the infrastructure, expertise, and vendor maturity needed to do so compliantly.

What connects both is that neither problem is solved by regulation alone. The MiCA Crypto Alliance will continue to contribute through its taxonomy initiative, banking research, and upcoming events including the Future of Banking & Digital Assets Roundtable in Brussels, working to ensure that classification frameworks and compliance practices develop together, grounded in how these systems actually function.