Institutional staking will only take off if asset lock-up is resolved: Coinbase CFO

Institutional staking of crypto assets, including post-merger Ethereum, may become a “phenomenon” in the future, but not so long as their assets have yet to be “locked up.”

Speaking on a second quarter earnings call on Aug. 9, Chief Financial Officer (CFO) Alesia Haas said she did not expect their new proprietary institutional staking service, rolled out in the second quarter, being a “short-term phenomenon” until a “truly liquid staking option” becomes available.

“This is the first time we had the products available. Previously, institutions could access staking via Coinbase Cloud […] But offering it as a delegated staking service similar to what we have for retail clients.

However, Haas said his new staking service is still “at the beginning,” adding that he likely won’t see a “real hardware impact” until he creates a liquid staking option for post-merger Ethereum, also known as as ETH2.

Liquid staking is the process of locking in funds to earn staking rewards, while still having access to the funds.

Haas explained that many financial institutions “don’t want their assets to be held indefinitely.”

“So when you stake on ETH2, you lock your assets into Ethereum until the merger and then some time after. For some institutions, this blocking of liquidity is not suitable for them. And so, even though they may be interested in staking, they want to have staking on a liquid asset.

Haas reiterated that this issue is “something we seek to address”, and added that once this liquid participation is available to financial institutions that can pool funds in higher proportions, “we will see the real material impact of institutional income”.

Related: Coinbase partners with BlackRock to create new access points for institutional crypto investing

Investors and institutions were able to access Coinbase’s delegated staking service through “Coinbase Prime”, which was first launched in September 2021. The platform also offers other integrated services, such as access to a custodial wallet with enhanced security, real-time cryptographic market data and analytics, and other crypto-native features such as decentralized governance.

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