While liquid staking is still being developed, Coinbase’s new institutional staking offering won’t be a “near-term phenomenon”.
Institutional staking of cryptocurrency assets, such as post-Merge Ethereum, may become a “phenomenon” in the future, but not as long as their assets need to be “locked up.”
Chief Financial Officer (CFO) Alesia Haas said during a Q2 earnings call on August 9 that she didn’t anticipate their new exclusive institutional staking service, launched in Q2, to be a “near-term phenomena” until a “really liquid staking option” is made available.
“This is the first time we had the products available. Previously, the way that institutions could have access to staking is via Coinbase Cloud […] But offering it as the delegated staking service similar to what we have for retail customers.”
Haas clarified that their new staking service is still in its “early days,” and that they won’t likely experience a “real material impact” until they have developed a liquid staking alternative for post-Merge Ethereum, also known as ETH2.
Liquid staking is the technique of locking up money while maintaining access to it in order to collect staking incentives.
Many financial organizations, according to Haas, “don’t want their assets retained permanently.”
“So when you stake ETH2 you are locking in your assets into Ethereum until the Merge and then some period after. For some institutions, that liquidity lock-up is not palatable to them. And so, while they may be interested in staking, they want to have staking on a liquid asset.”
In addition, Haas said that until this liquid staking is made available to financial institutions that can pool in assets at bigger proportions, “we’ll see the true material impact of institutional revenue” and reiterated that this is a problem that “we are seeking to solve.”
Coinbase’s delegated staking service is available to investors and institutions via “Coinbase Prime,” which was initially introduced in September 2021. The platform also provides other integrated services, like access to a custody wallet with improved protection, real-time data and analytics on the cryptocurrency market, and other features specific to cryptocurrencies, like decentralized governance.
