BNY Taps Figment for Institutional Ethereum Staking

Figment joins Galaxy in BNY’s staking model

BNY’s head of digital asset custody, Ralf Roth, said in Figment’s announcement that institutions increasingly want clarity about who is responsible for security and oversight when they stake. Figment named asset managers, exchange-traded fund issuers, corporations and wealth management firms among the clients that could use the service.

BNY first announced its staking plans with Galaxy in August, subject to regulatory review. In its Nov. 12 description of the custody model, the bank named both Galaxy and Figment as validator providers. BNY has yet to say whether clients will choose a provider or how it will divide assignments between them.

The bank began offering digital asset custody in 2022 and has since expanded it to include XRP and RLUSD. BNY reported $63.4 trillion in assets under custody or administration at Sept. 30 in its quarterly filing. That figure covers the wider bank. The amount of ether eligible to be staked through the service was undisclosed.

BNY’s August announcement also outlined services such as fund accounting and reporting where applicable. Those functions are part of the relationship a fund already has with its custodian. Staking adds a separate set of tasks, including checking that a validator is operating and accounting for the rewards it earns.

How Ethereum staking works inside BNY custody

Staking commits ether to help verify activity on Ethereum. The network pays validators rewards in ETH for doing that work and can impose penalties when they miss duties or break certain rules. BNY says client assets stay in its custody framework while the outside providers supply the infrastructure that runs those validators.

For institutions that already hold ether with BNY, the setup would bring staking into the same service they use to safeguard their assets. That reduces the need to arrange custody and validator services separately. An institution still has to account for the time it can take to get its ether back. Ethereum’s withdrawal rules allow for a queue when validators exit, and the wait depends in part on how many are leaving.

BNY flagged reward payment settings, access controls and incident response as areas that need oversight. A validator outage can interrupt rewards even when the bank’s custody systems are working. BNY said it would oversee both providers, and its account of the arrangement gave no details on how losses from validator penalties would be handled.

What BNY’s staking deal leaves open for funds

Some funds already spell out how those delays can affect their holdings. The 21Shares Ethereum ETF’s February agreement with Figment said ether and rewards could be temporarily unavailable while the network processes deposits to, or exits from, staking. Figment also supplies infrastructure for Morgan Stanley’s ether and Solana products. Access through BNY would give eligible fund issuers another way to arrange staking through a custodian.

The 21Shares filing said it generally expected Figment’s fee to be a low single-digit percentage of rewards. Figment and BNY have given no comparable figure for clients of the bank.

Alternative.me’s Crypto Fear and Greed Index fell to 13 on Nov. 14 from 20 a day earlier, with both readings in Extreme Fear. The dollar value of any rewards paid in ETH moves with the token’s price.

BNY and Figment have yet to disclose fees, how rewards will be split or which clients will be able to stake at launch. The first date clients can stake ether through BNY, followed by a timetable for Solana, will clarify when the service becomes available.