Blockchain Regulation Matrix
The Blockchain Regulation Matrix (BRM) establishes a framework outlining the concerns of regulating the blockchain from both the government and the consumer perspective, and in doing so, provides a pragmatic and clear approach to Web3 regulation. The BRM outlines regulation aspects of the blockchain by viewing it as a blockchain stack in many layers starting with the electricity physically supporting the blockchain at the base layer, all the way to the process of offloading crypto to fiat currency. With centralization and decentralization on either side of the matrix, the primary objective of the BRM is to understand where and how regulation of the blockchain should be developed specific to each layer.
Beginning with the electricty supporting the blockchain, as you hover over the images of each row, you'll see the specifics for that topic within that layer. The left side refers to projects that are centralized, while the right side refers to projects that are decentralized. For example, if there was an organization or business that wanted to provide electricity to miners in their area, that would be a centralized project. However, if there was a solar farm operating as a DAO that wanted to provide electricity to miners, that could be a decentralized project.
There are two illustrations of the Blockchain Regulation Matrix below, a short-form immediately below and a long-form afterwards.
Hover over the icons to preview each topic, and click any icon to pin its details — the address bar then links straight to that cell, ready to share.
Capabilities-based Consensus Mechanismscentralized
This row applies only to the blockchains with capabilities-based consensus mechanisms.
Partially addressedThe custodial/protocol staking line is drawn by a settlement and a staff statement, not law.
Government Concerns
- Upgrading consumer security standards
- Concentration of stake under a few custodial providers and exchanges
Consumer Risks
- Insufficient protection of user data and privacy
- Potential exposure to smart contract vulnerabilities
- Lack of recourse in case of unauthorized transactions
- Slashing and downtime losses on stake delegated to a provider
Cons to over-regulation
- Hampering innovation by imposing rigid security standards
- Reducing accessibility and inclusivity by raising entry barriers
- Limiting the potential of decentralized applications (dApps) due to excessive control
Cons to lack of regulation
- Proliferation of insecure smart contracts leading to financial losses
- Erosion of consumer trust and confidence in blockchain applications
- Difficulty in addressing cross-border disputes and fraudulent activities
Does blockchain technology currently exist to fulfill these obligations, and if so, what is it?
- Slashing conditions that make validator misbehavior economically self-defeating
- Distributed validator technology splitting one validator across independent operators
- Client diversity programs reducing correlated-failure risk
Current regulatory landscape
- enforcementSEC v. Kraken staking-as-a-service settlement — US, 2023. Custodial staking programs marketed with yields were treated as unregistered securities offerings.
- guidanceSEC staff statement on protocol staking — US, 2025. Protocol-level staking held not to be a securities offering; the custodial/protocol line now defines this layer's regulatory boundary.
- enactedMiCA whitepaper disclosure regime — EU, 2024. Consensus incentives and staking mechanics must be disclosed in crypto-asset whitepapers.
Notable incidents
- stETH discount under stress (2022) — During the Celsius/3AC unwind, liquid-staked ETH traded well below ETH, showing how staking derivatives add a second, market-priced layer of risk.
- Solana liveness outages (2022–24) — Repeated full-network halts showed that stake-based designs can trade liveness for throughput — a consumer-facing consensus risk with no consumer remedy.