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.
Node / Validator Layercentralized
This row applies only to the nodes or validators that are validating the transactions for each block.
Partially addressedCustodial staking is governed by enforcement history and staff guidance, not statute.
Government Concerns
- Not reporting income
- Fault tolerant consensus
- Decryption Standards
- Custodial staking services pooling customer assets without clear classification
Consumer Risks
- Private Transactions
- Selective Transactions
- MEV Protection
- Provider slashing penalties and downtime losses passed through to customers
Cons to over-regulation
- Centralization
- Inhibiting technological growth
Cons to lack of regulation
- Potential displacement of development activities to more permissive jurisdictions
- Transaction monitoring
- Selective transactions and private transactions
Does blockchain technology currently exist to fulfill these obligations, and if so, what is it?
- Proposer-builder separation (MEV-Boost) making block-building competition transparent
- Distributed validator technology (Obol, SSV) splitting one validator key across independent operators
- Slashing conditions that make validator misbehavior economically self-defeating
Current regulatory landscape
- enforcementSEC v. Kraken staking-as-a-service settlement — US, 2023. Kraken paid $30M and shut its US custodial staking program — the action that defined custodial staking as the regulated end of this layer.
- guidanceSEC staff statement on protocol staking — US, 2025. Staff view that self/protocol staking (including certain delegated forms) is not a securities offering — reversing the Kraken-era chill.
- enactedMiCA custody provisions — EU, 2024. Custodial staking falls under CASP authorization and client-asset safeguarding rules.
Notable incidents
- OFAC-filtered block building (2022–23) — After Tornado Cash sanctions, a majority of Ethereum blocks briefly excluded sanctioned transactions — a live demonstration of censorship pressure entering at the builder/validator layer.
- Lido stake-share debate (2023–) — A single liquid-staking protocol approaching one-third of staked ETH raised consensus-safety and governance-concentration alarms across the ecosystem.