BNY and Galaxy announced on August 4 that they are collaborating to bring staking services to BNY's Digital Asset Custody platform, with Galaxy set to provide the underlying infrastructure and assist in designing the offering. BNY, America's oldest bank founded in 1784, is one of the world's largest custodians with tens of trillions of dollars in assets under custody and administration. Galaxy is a digital asset financial services firm operating across trading, asset management, and blockchain infrastructure. The service remains subject to regulatory review, and no launch date has been disclosed. According to the official announcement, the two companies will work together on the architecture of the planned product.

Service Structure and Institutional Access

Under the proposed arrangement, institutional investors holding eligible digital assets with BNY would be able to stake those assets directly through the bank's custody platform, eliminating the need to arrange staking services through a third party. Galaxy would supply the specialized infrastructure required to participate in proof-of-stake networks, while BNY would retain the client relationship and integrate the service with its existing offerings, including custody, fund accounting, tax reporting, payments, and institutional reporting, depending on the asset and the client.

Staking involves committing tokens to help validate transactions and secure a blockchain network. In return, the network distributes rewards to participants. However, the amount of these rewards can fluctuate based on validator performance, overall network participation, and the specific rules governing each protocol.

For institutional clients, the operational advantages are significant. Running validator nodes, managing private keys, and tracking network rewards internally requires technical systems and controls that many asset managers prefer not to build and maintain in-house. The BNY-Galaxy partnership would allocate these responsibilities between an established custodian and a firm already operating blockchain infrastructure.

Unanswered Questions on Terms and Conditions

The announcement leaves several key practical questions unresolved. BNY and Galaxy have not yet identified which cryptocurrencies will be eligible for staking, how rewards will be distributed, what fees clients will incur, or how long withdrawals and the unstaking process may take.

These details can differ substantially across blockchain networks. Some assets can be unstaked relatively quickly, while others require participants to wait through protocol-defined exit periods that may last days or weeks.

Staking rewards should not be equated with interest earned on a bank deposit. Returns are variable, access to staked assets may be delayed, and technical failures can result in lost rewards or penalties on certain networks. While using a familiar custodian may simplify administration, clients would still depend on Galaxy's infrastructure and the proper functioning of the underlying blockchain.

Regulatory Review Required Before Launch

Both companies described the planned service as subject to regulatory review. The partnership announcement does not confirm that staking is currently available through BNY. The final structure may also be influenced by regulatory requirements related to custody, client disclosures, reward treatment, and the division of responsibilities between BNY and Galaxy.

Staking services have drawn particular regulatory attention in the United States. In February 2023, the SEC charged Kraken with failing to register its staking-as-a-service program, resulting in a $30 million settlement and Kraken discontinuing the offering for US customers. That case underscored questions about whether staking services offered through intermediaries should be treated as securities transactions, a consideration that can influence how banks and other regulated firms structure such products.

Until the regulatory process concludes, the announcement represents a planned initiative rather than an active product launch.

How BNY's Approach Differs From Staking ETPs

The collaboration comes as traditional financial firms increasingly offer institutions multiple pathways to gain exposure to staking rewards. At the end of July, Morgan Stanley launched Ethereum and Solana ETPs with staking, allowing investors to receive exposure through exchange-traded securities without directly holding or staking the underlying tokens.

BNY's planned service targets a different segment: institutions that already own digital assets and custody them with BNY. Rather than purchasing an exchange-traded product, these clients would earn staking rewards on tokens held directly through BNY's platform. The distinction is meaningful — an ETP investor holds a security whose value is linked to underlying assets and rewards, while a custody client owns the digital assets directly and relies on the custodian to manage the operational and reporting requirements associated with staking.

BNY's proposal would add a new capability to its digital-asset custody business, though its practical utility cannot be fully assessed until the companies disclose the supported networks, costs, withdrawal rules, and approach to validator-related risks.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Staking rewards are variable and can involve technical, liquidity, regulatory, and validator risks.