Crypto Staking Gains Institutional Momentum Amid Regulatory Divergence
As returns reach up to 10%, financial institutions explore blockchain staking while navigating diverging regulatory landscapes across Europe and the US
In the rapidly evolving digital asset space, institutional interest in crypto staking is gaining ground, driven by yield opportunities that rival traditional fixed income. As interest rates ease globally, blockchain staking is a potential mainstay in portfolio strategies, offering governance participation and passive income.
However, its growth remains uneven across jurisdictions, shaped by regulatory interpretation and technological infrastructure.
Crypto staking is the process of locking digital tokens on a Proof-of-Stake (PoS) blockchain network to help validate transactions and earn rewards. In essence, it's a way for users to actively participate in securing the network and, in return, receive additional cryptocurrency as a reward.
"Staking is not lending. It's a protocol-based activity that yields some economic results and rewards," said Hadley Stern, Chief Commercial Officer at Marinade Finance.
His remark underscores a key distinction that regulators are only beginning to grasp.
Institutions keen on staking must first understand that it's not counterparty risk but blockchain protocol risk—a significant difference from legacy financial instruments.
Ethereum and Solana, two of the most prominent PoS networks, offer annual returns ranging from 2 to 10%.
Stern noted, "On Ethereum, it's about 2 to 3%. On Solana, it ranges 8 to 10%."
These figures are difficult to ignore, especially when staking can also serve a governance role, reinforcing network security and decision-making.
Dovile Silenskyte, Director of Digital Assets Research at WisdomTree, emphasized the multifaceted role of staking: "Besides earning additional return, it's also ensuring that the blockchain you are invested in, or the blockchain that you're using for various, multiple reasons, is operating as designed."
The function of staking, she added, is vital for institutional investors seeking secure and governed digital asset exposure.
Staking in European Investment Products
In London, Stern and Silenskyte shared perspectives during the Digital Assets Summit on May 6, highlighting the disparate regulatory climates shaping staking adoption.
Silenskyte pointed out that European investors benefit from exchange-traded products (ETPs) that incorporate staking, a structure currently unavailable in the United States.
"In Europe, exchange-traded products are allowed to participate in staking, which is not the case in the US," she said. "The US Securities and Exchange Commission may allow Ethereum staking in the future within the Ethereum ETFs, but this is not the case now."
Stern concurred, noting that while the US has lagged, regulatory winds may be shifting under the new administration.
"When the Ethereum ETFs under the previous administration were filed, they were filed with staking in them, and the SEC at that time said we won't approve unless you remove staking," he said. "Given the new regime and the SEC and the conversations we've been having, we're very optimistic that will happen this year."
WisdomTree, which manages over $115 billion in assets, is actively leveraging staking across its European crypto ETPs. For Solana, the short 48-hour un-staking window allows them to commit more capital to staking than Ethereum, where un-staking can take up to 11 days.
Risks and Regulatory Clarity
A significant concern for investors is differentiating staking from lending, especially after high-profile collapses in the crypto credit markets.
"It's very important to be clear that these are protocol-based behaviors," Stern clarified. "So it's not like when you stake to Solana or Ethereum, there's some random market maker on the other side who holds your asset."
Additional risks include slashing, particularly within Ethereum, where validators behaving incorrectly can be penalized.
"If you participate in staking, and the thing that you use for staking is making some mistakes or is doing something in accordance with the rules, then the amount that you stake may be reduced as a penalty," said Silenskyte.
Liquid staking — where investors receive a token representing their staked position — introduces smart contract risk, while native staking bypasses that by directly interacting with the blockchain protocol.
"For custodians like Copper and Zodia... when you stake through Marinade, you give us delegate authority to move that stake to validators, but you, as the end fund or client, retain withdrawal rights," Stern explained.
This native staking architecture addresses compliance expectations and fiduciary control, which are essential for institutional adoption.
Silenskyte said anyone who takes a holistic view of the product they're investing in should evaluate how staking is achieved, what staking return they can expect, and what remains after the management expense ratio is subtracted.
Gradual Uptake by Institutional Investors
Despite growing yields and institutional interest, both speakers agree widespread adoption is still on the horizon.
"For most investors, step number one is Bitcoin," said Silenskyte. "Now they are getting to the stage where adding Ethereum, Solana exposures, or even crypto basket exposure is what they are looking to do."
Stern described the adoption curve as a "Russian doll," with investors gradually moving deeper into the ecosystem. "You've got crypto, Bitcoin, Ethereum, Solana, staking, Marinade. So getting along with that journey, the thing that drives it is obviously the yield."
"Many savvy investors will compare it to other interest rate-bearing products," Stern added. "But I think what you ask is an interesting question. I don't think we're quite there yet regarding how staking yield fits into an investor's portfolio."
Silenskyte noted, "When I have discussions with institutional investors, they're mostly interested in hearing that the staking returns more than offset the management expense ratio they pay."
Toward a Financial Infrastructure Role
Looking ahead, staking may become an income strategy and a foundational layer in the next-generation financial infrastructure.
Stern, who helped shape crypto policy during his time at Fidelity, drew a parallel with Bitcoin mining.
"One of the first conversations we had was about whether Fidelity should mine Bitcoin, and it wasn't a return-based conversation. It was more of a participant in the Bitcoin network. If we're going to build products and services, we should probably be involved in mining. And I think that's what's going to happen with staking."
For Silenskyte, the direction is clear: "We recently launched a new crypto basket exchange-traded product that is physically backed and that participates in staking. It's for investors who want crypto exposure but do not know which cryptocurrency may be successful over the next 5-10 years."
Both agree that staking will continue to evolve from a niche protocol activity into a cornerstone of digital asset investment. And if Europe's model is any indicator, the rest of the world may soon follow.