Despite the underperformance of Ethereum (ETH) compared to Bitcoin and other digital assets in the current market cycle, there’s a surge in institutional interest for Ethereum staking, says Kean Gilbert, head of institutional relations at Lido Ecosystem Foundation. This rising interest is fueling the need for custody solutions that cater to a diverse group of investors.
On May 27, Komainu, a regulated digital asset custody provider, introduced custody support for Lido Staked ETH (stETH), Ethereum’s most significant staking token that accounts for 27% of all staked Ether ETHUSD. The service is available for institutional investors in Dubai, United Arab Emirates, and Jersey, a self-governing British Islands territory. This initiative facilitated a compliant route for institutions to access Ethereum staking yields during a period of significant diversification into digital assets.
“Staking strategies are actively being explored by asset managers, custodians, family offices, and crypto-native investment firms,” Gilbert revealed to Cointelegraph. Meanwhile, US exchange-traded fund issuers await clear regulatory guidelines to launch Ethereum staking ETFs.
Despite Ethereum’s lackluster performance, Gilbert noted that institutions find liquid staking tokens like stETH appealing as they address issues related to capital lock-ups and intricate custody arrangements. Tokens like stETH offer immediate liquidity and are compatible with qualified custodians like Komainu, Fireblocks, and Copper.
Lido’s institutional adoption drive has picked up pace recently, with the launch of Lido v3, featuring modular smart contracts designed to help institutions comply with regulatory requirements. Gilbert emphasizes that custody solutions are vital for certain institutions, like asset managers and family offices, which operate under stringent compliance and risk management frameworks.
He contrasted this with crypto-native firms, which are more comfortable handling crypto assets directly and often bypass third-party custody solutions. Gilbert points out that staked Ether tokens like stETH are increasingly being used by both traditional and crypto-native institutions to reap Ethereum staking rewards without tying up capital for extended durations.
These tokens also offer liquidity benefits through decentralized finance (DeFi), centralized finance (CeFi), and over-the-counter (OTC) markets. As a result, the demand for staked Ethereum has surged significantly. Cointelegraph recently reported that the amount of Ether staked in the Beacon Chain hit a new record high.
