Digital Asset staking has a problem.

Major institutional players increasingly want to participate, but most of today’s staking providers aren’t regulatory or enterprise-friendly. The status quo is infrastructure pieced together by small, sometimes inexperienced teams on centralized Big Tech clouds that are not tuned for digital assets – nor engineered to meet the regulatory compliance standards that major players like BlackRock demand. The traditional financial world has long-established standards for robust risk management strategies crucial to fulfilling institutional needs, and their service providers in the decentralized financial world must meet these requirements.

And this is only the beginning. There are several essentials that every institution must consider when evaluating staking options. This guide covers the top five, including:

• Multi-Stake: diversification of providers, hardware & approach
• Security of people, processes & technology
• Service & reporting
• Custodial integrations & relationships
• Regulatory compliance, especially with audited practices like SOC 2 or ISO27001 – and CCSS

We’ll first explore why diversification is the foundation of a resilient staking strategy and how the remaining pillars build on it.

Diversification: The Cornerstone Of Institutional Staking & Your Reassurance

Following the spectacular collapse of FTX, institutions and sophisticated holders alike took a step back to revisit their custody practices. A paramount consideration was the shift to custodian diversification. As highlighted by Boston Consulting Group, diversification minimizes the impact of a single point of failure across market, counterparty, regulatory, and security risks.¹

With innovation thriving and new providers continuing to emerge, the institutional staking industry sector has adopted a diversification theme, focusing on similar risk mitigation considerations. 

It extends beyond service providers – a diversity of core infrastructure, hardware, networks, ownership, and staking approaches is also essential. As with telecom and data networks in the early 2000s, reliance on “diverse” providers that ride on the same physical layer undermines true diversity.

Reliance on “diverse” providers that ride on the same physical layer undermines true diversity.

For example, operators (such as the largest staking providers) that rely heavily on “big tech” hyperscaler cloud infrastructure (AWS, Google Cloud, Azure, etc.) face centralization, unnecessary third-party risk, and cost management concerns that are only avoided by a handful of specialist bare-metal staking operations such as GlobalStake. IBM highlights the security benefits of bare metal solutions in critical applications.² Bespoke bare metal staking providers run their own infrastructure and control their own networks – purchasing and owning equipment outright, fully controlling and tuning hardware, software, and network routing, and operating through distributed global data centers rather than renting from big tech and third-party suppliers. Pro tip: If your provider says they use bare metal, ask them for specifics. Do they own it?  Do they manage it directly? Which networks (or geographies) do they serve with bare metal?

Critical Benefits Of Diversification For Institutions

Optimized Returns

Diversification leverages the strengths of different partners, not only mitigating risks but potentially leading to higher overall returns. CoinDesk’s annual report emphasizes how performance can vary significantly between providers.³

Improved Regulatory Compliance

Regulatory landscapes are constantly in flux. Diversification helps navigate potential changes that could impact staked assets in specific jurisdictions, as KPMG’s report on blockchain regulations highlights, reassuring you that your staked assets comply with the latest regulations relevant to local geography.⁴

Multi-Stake: The New Standard for Institutional Staking Resilience

In the traditional finance sector, hedge funds have adopted a “multi-prime” approach—engaging multiple prime brokers—to mitigate counterparty risk, enhance access to diverse services, and optimize operational efficiency.⁵ The practice became critically necessary after the 2008 financial crisis. 

As the cryptocurrency industry matures, institutional investors must adopt a “multi-stake” strategy—diversifying their staking activities across multiple providers—to ensure resilience and optimize their participation in the evolving digital asset ecosystem. This approach is critical for several reasons:

• Risk Mitigation: Distributing staked assets among various providers significantly reduces the impact of potential failures or performance issues associated with a single provider.
• Service Optimization: Different staking providers offer unique benefits, such as varying fee structures, enhanced security measures, or superior customer support. Engaging multiple providers enables institutions to capitalize on the best aspects of each.
• Operational Resilience: A multi-stake approach ensures continuity in staking operations by not relying upon a single entity. This resilience is essential for maintaining consistent rewards and meeting network participation requirements.
• Improved Regulatory Compliance: Regulatory landscapes are constantly in flux. Diversification helps navigate potential changes that could impact staked assets in specific jurisdictions, as KPMG’s report on blockchain regulations highlights, reassuring you that your staked assets comply with the latest regulations relevant to local geography.⁴

By adopting the multi-stake model, institutional crypto holders align with well-established financial practices, ensuring a more secure, efficient, and scalable staking environment as the industry progresses.

Choosing The Right Staking Partners: Beyond Diversification

Once diversification—the most critical foundational staking pillar—becomes a priority for an institution, the other essentials become clear, helping to refine the list of options and choosing the right partners to work with.

Here is how to consider key factors impacting your overall staking strategy:

Security of People, Processes, & Technology: 

Ensure your provider follows industry best practices across its enterprise. These include background checks of all employees, creating repeatable and defined processes that remove risks at every turn, and ensuring the technology keeps pace with changes. You should also understand how heavily your provider relies upon outside contractors versus full-time staff.

Service, Reporting, Insurance, & Flexibility: 

Far too many staking providers are hidden behind a wall of web applications and automated help desks (if any). Being able to speak with a capable account manager is an important attribute, especially when considering the daily and monthly reporting that institutions must regularly deliver to their management, investors, regulators, and accountants.

Staking providers should be able to provide detailed, tailored reporting on staking activity. Ideally, this should manifest in an offering that provides real-time dashboards, customized reports, and actionable insights into staking performance, helping institutional decision-makers evaluate and refine strategies.

While best practices for node management substantially limit the risks of losing digital assets, the most capable providers typically offer slashing insurance from the highest-rated carriers. Finally, flexibility in deployment configurations and the capacity to support bespoke client applications can be a significant value add.

Custodial Integrations, Self-Custodial Technology Solutions & Relationships:

Credible, qualified custodians serve as the foundation of secure institutional staking. Partnering with trusted custodians or leveraging self-custodial technology solutions, such as BitGo—which offers both options—ensures a seamless and secure staking experience. These partnerships enable adherence to best practices and foster trust throughout the staking process. Additionally, many global custodians enhance their offerings by utilizing advanced custodial enablement platforms like Ledger Enterprise, further reinforcing the security and efficiency of institutional staking solutions. As Forbes highlights, the involvement of trusted custodians is essential for meeting stringent security standards and aligning with institutional expectations.⁶

Equally important is seamless technical integration with institutional-grade custodial platforms. Providers should prioritize compatibility to streamline onboarding processes, minimize operational friction, and enhance the overall user experience for institutional clients. By ensuring a smooth and secure connection between staking services and custodial platforms, providers can better meet the needs of sophisticated investors and solidify their position as trusted partners.

New, Old, & Niche Asset Support

Crypto moves fast. A key distinguishing factor for an institutional staking provider is its ability to swiftly support new tokens. A valuable staking partner will promptly fulfill new token requests and establish deep integrations with emerging protocols. Custodial connectivity empowers institutions to rapidly adapt to market shifts and capitalize on new opportunities without being hindered by technical delays or inflexible integration processes.

For instance, several providers in the industry, like Figment, GlobalStake, Kiln, and others, demonstrate their capability in this area by working directly with protocol teams. This direct involvement enables quick and accurate support for new tokens and unique requirements, ensuring any updates or new features are implemented precisely, thereby reducing the risk of errors that could affect staking outcomes. They also provide dedicated and responsive account personnel who work closely with institutional clients to support new and existing assets, highlighting their commitment as a reliable partner in the rapidly evolving digital asset landscape.

Your best staking partner does more than meet today’s needs – it anticipates tomorrow’s opportunities.

Staying at the Cutting Edge of Staking Innovation

Your best staking partner does more than meet today’s needs – it anticipates tomorrow’s opportunities. A true partner ensures institutions remain at the forefront of staking developments by integrating the latest advancements, such as Liquid Staking Tokens (LSTs) for enhanced liquidity and MEV (Maximal Extractable Value) boosting for optimal returns. Innovations like proof-of-stake mechanisms combined with proof-of-work elements in hybrid protocols and secure storage solutions ensure robust performance and security. Advanced storage protocols, such as decentralized data storage networks, further complement staking by safeguarding validator data and key material with unparalleled redundancy and resilience. From yield enhancements and slashing protection to protocol governance participation and emerging storage innovations, a cutting-edge partner ensures clients capitalize on every advantage the evolving staking ecosystem offers. Is your provider committed to pioneering advancements and driving institutional success?

Compliance With Audited Practices:

For institutions, compliance is non-negotiable. 

Audited Peace of Mind

Full SOC 2 Type 2 certification is critical as a starting point, particularly for those operating in the U.S. market. To instill confidence in the rigor of their internal digital asset protections, staking providers must adhere to other recognized standards such as ISO27001 with the absolute requirement to become certified by the Cryptocurrency Security Standard (CCSS) – ensuring safety across crypto-specific processes and technologies, wallets, validators, and key management, et al.

Research by Gallagher highlights the trust and security benefits of SOC 2 compliance for service providers.⁷ Regular, independent audits are essential to demonstrate a commitment to evolving regulations and ensure transparency and operational reliability. These practices reassure stakeholders that their assets are secure and always managed with the highest integrity.

Operations and technology transparency are paramount. While some node operators rely on proprietary methods, providers offering visibility into their operating procedures and network principles stand out. Opaque, black-box systems do not engender client confidence.

Environmental Sustainability

Beyond compliance and transparency, environmental sustainability has emerged as a valuable bonus, particularly as institutional investor priorities shift toward environmental responsibility. The crypto industry has faced sustainability critiques for over a decade, making it increasingly important for institutions to align with environmentally responsible providers. By integrating sustainability into operations, providers differentiate themselves and help institutions future-proof their strategies in a regulatory environment rapidly evolving toward greener mandates.

Here’s How to Build A Resilient Staking Strategy

Institutions require more than just basic staking services.

A resilient strategy begins with diversification—spreading activity across reputable providers and incorporating self-hosted bare-metal infrastructure to minimize risk and provide physical diversity in addition to provider diversity.

GlobalStake is the premier bare metal institutional staking platform, delivering comprehensive solutions designed with the utmost security, performance, and regulatory compliance in mind. Unlike providers reliant on third-party systems or cloud infrastructure, GlobalStake operates its own globally distributed, bare-metal network. This unique approach fosters true decentralization, enhances control, and mitigates regulatory and cloud-specific vulnerabilities. Backed by SOC 2 Type 2 and CCSS certifications, GlobalStake adheres to the highest operational security standards, providing institutions with the utmost confidence as they stake assets such as $SOL, $ETH, and $DOT. Seamless integrations with leading custodial platforms like Ledger Enterprise, Cobo Custody, and BitGo empower institutions to seamlessly manage their staking operations within their existing, familiar ecosystems.

With a commitment to sustainability and transparency, GlobalStake is a carbon-negative node operator aligning with responsible investment principles. The platform’s decentralized infrastructure, utilizing diverse hardware, geographies, and networks, minimizes single points of failure, enhancing security and reliability. GlobalStake empowers institutions to optimize staking returns through responsive service, flexible and competitive pricing, robust custodial integrations, tailored cutting-edge staking strategies, and comprehensive insurance coverage provided by top-rated carriers. This comprehensive approach enables institutions to build resilient, long-term solutions for their digital asset management needs.

For our Blockworks readers, discover why institutions like yours trust GlobalStake. To see the difference GlobalStake makes, book a one-on-one consultation with its experts. To request a meeting, email the institutional partners team at [email protected].

GlobalStake delivers institutional-grade staking with self-owned, SOC2-certified bare-metal infrastructure, carbon-negative operations, and comprehensive security. Enjoy competitive pricing, decentralized operations, and slashing insurance backed by top-rated carriers. Learn more at globalstake.io.

Citations

1. Boston Consulting Group, “Managing Risk for the Next Wave of Digital Currencies.” https://www.bcg.com/publications/2023/managing-risk-for-next-wave-of-digital-currencies
2. IBM, “Bare Metal Servers vs Virtual Servers.” https://www.ibm.com/think/topics/bare-metal-servers-vs-virtual-servers 
3. CoinDesk, “Consensus Annual Report 2023.” 
4. KPMG, “Crypto and Digital Assets: Regulatory Challenges.” https://kpmg.com/us/en/articles/2022/ten-key-regulatory-challenges-2022-crypto-digital-assets.html
5. Merrill Lynch, “The Multi-Prime Broker Environment: Overcoming the Challenges and Reaping the Benefits https://www.opalesque.com/files/MultiPrimeBrokerEnvironment.pdf
6. Forbes, “The Institutional Guide for Securing Digital Assets.” https://www.forbes.com/sites/digital-assets/2023/10/30/the-institutional-guide-for-securing-digital-assets/
7. Gallagher, “SOC 2 Type 2 Certification: What it is and Why it matters.” https://security.gallagher.com/en/Blog/SOC-2-Type-2-certification-what-it-is-and-why-it-matters 

This content is sponsored and does not serve as an endorsement by Blockworks. The veracity of this content has not been verified and should not serve as financial advice. We encourage readers to conduct their own research before making financial decisions.