In February 2023, Payward Ventures and Payward Trading – crypto-asset entities operating under the more familiar Kraken brand – paid $30 million in settling Securities and Exchange Commission charges that it failed to register a “staking-as-a-service program” that advertised annual investment returns of up to 21%.
Whether through a staking service, lending or other means, crypto intermediaries “need to provide the proper disclosures and safeguards required by our securities laws,” then-SEC Chair Gary Gensler reprimanded.
Three years later, staking may still seem arcane outside of crypto world. But as digital assets have grown and gone mainstream, increasingly fueled by institutional investing, staking is being recognized as a legitimate contributor to an otherwise often volatile value proposition.
It is a “very, very simple” model, Joseph Chalom, a longtime BlackRock executive who is now CEO of SharpLink, explained to TheStreet last October. Participating in the Ethereum proof-of-stake blockchain, the company collects rewards from its holdings of ether. “You get yield back, which is called staking yield,” Chalom said, then at about a 3% rate.
Annualized staking reward rates. Source: Grayscale (CoinDesk data).
Asset manager Grayscale provides a simple definition in the title of a “Staking 101” explainer: Secure the Blockchain, Earn Rewards. Staking is part of the consensus mechanism that ensures the security and integrity of Ethereum and such other proof-of-stake (PoS) blockchains as Solana, Avalanche and Cardano.
Bitcoin’s validation method, by contrast, is proof of work (PoW). The cryptocurrency is created and fees are earned via bitcoin mining.
For many, Chalom’s move to SharpLink cast new light on staking and on the digital asset treasury (DAT) strategy promulgated most prominently by Michael Saylor of Strategy, which has accumulated billions worth of bitcoin as a principal asset. SharpLink was taking a similar tack, but with the ether (ETH) currency.
Joseph Chalom
SharpLink was founded in 2019 as SharpLink Gaming by Joseph Lubin, its board chairman, founder of blockchain software company Consensys, and a co-founder with Vitalik Buterin of Ethereum, which has become a preferred chain for many institutional applications and smart contracts.
After 20 years with BlackRock, a managing director who was most recently head of strategic partnerships with the likes of Coinbase and Circle Internet Group, Chalom joined Nasdaq-listed SharpLink as co-chief executive officer in July 2025. He has been the sole CEO and a director since November.
“Few executives in the world have had the kind of impact Joseph has had in unlocking institutional adoption of digital assets, having pioneered BlackRock’s strategic entry into the space,” Lubin commented. “His decision to join SharpLink is a resounding validation of our ETH treasury strategy.”
Chalom saw in SharpLink “a powerful opportunity to help shape the future of financial infrastructure and decentralized finance. SharpLink’s commitment to aligning its strategic direction with the Ethereum ecosystem reflects a bold and forward-thinking vision – one that deeply resonates with my passion for digital assets and scaling innovative financial technologies.”
Staking has been cropping up more often in product offerings and ecosystem operations. For example:
-- The Franklin Solana ETF, a Franklin Templeton exchange-traded product, providing exposure to the Solana (SOL) native token. “SOEZ seeks to reflect generally the performance of the price of Solana and the rewards from staking as much of the fund’s Solana as is practicable (up to 100%), before payment of the fund’s expenses and liabilities,” said a December announcement.
-- SDX Web3, a unit of Switzerland-based exchange and market infrastructure operator SIX Group, introduced custody and staking services for Avalanche (AVAX). It also was supporting “custody for Bitcoin (BTC), Ethereum (ETH), Solana (SOL), Cardano (ADA), Ripple (XRP), USD Coin (USDC); and staking services for Ethereum (ETH), Cardano (ADA) and Solana (SOL), with further expansion planned based on market demand.”
-- Touting its ability to offer “a better model – where staking isn’t just a standalone service, but a gateway to institutional-grade intelligence, access, and solutions” – The Tie in January acquired Stakin, “an institutional-grade staking provider with $1.5 billion in assets under delegation and a seven-year track record delivering secure, scalable staking infrastructure.”
-- In early February, Bitwise Asset Management added to its yield-generating portfolio by acquiring institutional staking specialist Chorus One. “For our thousands of clients who hold spot crypto assets, staking is one of the most compelling growth opportunities,” said Bitwise CEO Hunter Horsley, as reported by Bloomberg.
Tony Saliba
-- Liquid Mercury, a professional crypto-trading venture founded and led by longtime Chicago-based trader and market technology entrepreneur Tony Saliba, is preparing a Real World Asset (RWA) platform launch, with the MERC utility token powering the ecosystem. “MERC holders can stake tokens to receive monthly credits that offset platform service fees,” the firm says, specifying an 8% annual yield and minimum 12-month staking period. “These credits reward long-term participation and can be redeemed by institutional clients or transferred within the ecosystem.”
-- Brian Quintenz, a former Commodity Futures Trading Commission member and crypto policy expert whose nomination to head the CFTC was withdrawn last year, in January joined the board of Nasdaq-listed SUI Group. Quintenz’s appointment and support of “our SUI treasury strategy represents a meaningful validation of both SUIG and the long-term potential of the Sui ecosystem,” said company chairman Marius Barnett. “We expect Brian’s experience to be critical to maintaining institutional rigor, engaging constructively with policymakers, and positioning SUIG as a long-term participant in the institutional adoption of SUI.” Its delegated proof-of-stake (DPoS) model offers the option of delegating SUI tokens to trusted validators, enabling PoS participation without having to operate nodes directly, according to BitcoinIRA.
Like SharpLink CEO Chalom, those who “get it” stress the simplicity of the concept.
Maria Rosey
“Forget technical jargon,” says Maria Rosey, founder of One Touch Finance in India. Blockchains like Ethereum “need people to lock up cryptocurrency to keep the network running. You lock your crypto. The network pays you for helping.
“Imagine keeping money in your bank account helped the bank process transactions, and they paid you extra for it.”
One difference from a traditional-finance loan arrangement, which is premised on interest payments and the risk of default, is that tokens held in staking a network might crash in value. “You’re worried about the asset itself losing value while you’re earning yield on it.”
To Andrei Poliakov, CEO and co-founder, APX Lending, “Staking only becomes a true institutional asset class when it’s supported by clear governance, transparent custody, and a risk framework that regulators and traditional finance teams can actually evaluate.”
There needs to be understanding of counterparty risk, liquidity constraints during lockups, and how rewards are treated operationally and legally, Poliakov adds. “In building compliant crypto-secured lending products, we’ve found that digital-asset activities only become investable when their controls match the standards expected in traditional finance.
“Staking has real potential, but it needs consistent standards, predictable behavior under stress, and verifiable oversight [to meet] the requirements of regulated institutions.”
Ron Harper, owner of a Toronto legal services firm, says that clarifying guidance from the SEC last year “provides institutional investors with the ability to participate in staking without the fear of being involved in a potential unregistered securities litigation,” and that “liquid staking arrangements may also be viewed as not being securities if appropriately structured.”
Harper suggests that compliance officers view those pronouncements as “rules of the road,” but be vigilant for potential enforcement activity and for possible variances at the state level.
Reza Ebrahimi, CEO of Geneva, Switzerland, asset and wealth management company Forvest.io, sees staking as a legitimate “yield-bearing asset class,” but not without a clear risk management framework. He calls his focus “behavioral”:
Reza Ebrahimi
“By analyzing historical maximum drawdown [the biggest drop in an investment’s value from its highest point to the lowest point before it rises to a new peak], weekly and monthly ROI cycles, and volatility clustering, I build a behavioral-risk model that indicates how each asset reacts under stress. This helps determine whether reward structures genuinely compensate for downside risk – something many retail and even institutional participants overlook . . .
“The goal is to determine whether a PoS asset’s historical behavior supports its expected reward profile – and whether staking truly functions as a sustainable, institution-grade yield mechanism.”
Ebrahimi believes regulatory clarity is improving globally, citing the EU’s MiCA (Markets in Crypto-Assets Regulation), the Monetary Authority of Singapore, Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), with the U.S. being relatively more fragmented.
J.R. Faris, CEO of Accountalent, which serves the startup sector, says investors should not let the appeal of up to 12% staking yields distract from “how validator concentration affects the economic performance of the ecosystem.” A network might advertise itself as decentralized, when “in reality, the activity may be concentrated among fewer than 20 validators that collectively hold greater than 50% of the total stake. That exposure “does not equate to a distributed asset, but rather a thinly capitalized yield product.
“If one of those validators experiences an outage or has a disagreement over governance, all downstream participants will have their earnings frozen.”
J.R. Faris
Rather than treating staking as passively income-producing, Faris adds, it is more like an operating commitment. “Security spending and equipment selection directly impacts” investors’ returns.
“A validator that averages 0.5% monthly downtime will produce a quantifiable revenue gap over a 12-month period that compounds much faster than most investors anticipate,” Faris goes on. “By modeling staking using an operational perspective, institutional investors can create a framework to evaluate the risks that is consistent with [those] associated with other service providers and acknowledges the technological requirements of participating in a blockchain-based environment.”
Faris also points to “an inherent disconnect between how financial assets are accounted for according to generally accepted accounting principles (GAAP) and what actually occurs economically,” which may in turn raise questions about the timing of tax reporting and mark-to-market calculations.
A solution: audit trails which track when wallets were accessed, the frequency of the receipt of staking rewards, and historical performance metrics from the network.
“Once these audit trail entries are integrated into the client’s accounting system, the client can demonstrate defensible proof of compliance for audits and/or examinations by regulators,” Faris states.
Instead of considering staking as a passive source of yield, view it as a hybrid form of service revenue and intangible-asset creation. “Without that framework in place, there will continue to be compliance issues, and institutional adoption will likely be slow.”
Jeffrey Kutler of GARP contributed reporting for this article.