Shaping Regulations in Digital Innovation: The Case of Blockchain-based Staking

Digital innovators often outpace formal regulation with their market offerings, creating regulatory uncertainty stemming from absent and outdated regulations. This uncertainty means that digital innovators cannot rely on clear regulatory guidance and must actively shape the regulatory trajectory. By examining the case of blockchain-based staking in Switzerland and based on a rich set of qualitative data, we identify how regulations shifted over time through a process of shaping, driven by specific actions of the digital innovators. The specific manifestations of the four shaping actions - create regulatory narratives, leverage collective advocacy, interpretive integration, and explore regulatory boundaries, are influenced by the regulatory uncertainty in each phase. We contribute to the literature on digital innovation and regulation by illustrating how digital innovators engage with and influence regulation over time, helping define the boundaries of acceptable practice in fast-evolving technological domains.