RockX, a Singapore-based blockchain company, is looking to attract institutional investors to liquid staking with its new service, Bedrock.
As well as offering staking services to retail customers, Bedrock offers institutional-grade know your customer (KYC) and anti-money laundering (AML) compliance to institutions looking to stake more than 32 ether (ETH)($57,000), RockX said in an email Wednesday.
The company is initially targeting exchanges and wealth management platforms, with a view to attracting large funds and banking institutions further down the line, founder and CEO Chen Zhuling told CoinDesk in an interview. Crypto trading firm Amber Group, a RockX investor, will be one of Bedrock’s first clients.
Staking is a means of earning yield on digital assets, in which crypto holders can lock up their tokens to secure proof-of-stake blockchains in exchange for a reward. With liquid staking, investors keep their capital liquid and use their staked tokens as collateral by receiving derivatives.
Last month, liquid staking became the second-largest crypto sector when its total value of assets locked reached $14.1 billion, surpassing the $13.7 billion held on decentralized lending and borrowing protocols. Liquid staking platform Lido Finance has become decentralized finance’s largest protocol with about $10 billion worth of digital assets locked on the platform.
The catalyst for liquid staking is the Ethereum blockchain’s Shanghai upgrade, which will allow stakers to withdraw the ether (ETH) they have staked and for which they have accumulated rewards. The expectation is Shanghai will strengthen ETH by establishing a blueprint for staking protocols and give users more confidence in their sovereignty over their assets.
However, there have been doubts cast on the appetite for liquid staking among financial institutions, particularly in the Asian market closest to RockX. David Cicoria, head of markets technology for digital asset custodian Hex Trust, recently said institutions are giving it a miss due to risks of depegging, hacks and lack of regulatory clarity.
Zhuling agreed institutions do hold some of these concerns, but stressed the important distinction between custodial and non-custodial staking services. Bedrock falls under the latter.
“We are not holding any ETH at all. All the ETH is held in a smart contract and then deployed to validators,” he said.
“It’s very easy to tally how many coins are held in the pool and thence being passed on to validators, so there is no risk of inflation of the numbers or misappropriation of assets,” he added.