According to Kean Gilbert, head of partnerships at Lido Ecosystem Foundation, Ethereum (ETH) has underperformed compared to Bitcoin and other digital assets in the current market cycle, but institutional interest in staking Ethereum is driving demand for custody solutions to support more investors.
On May 27, Komainu, a regulated digital asset custody service provider, began offering custody support for Lido Staked ETH, Ethereum's largest staking token, which accounts for 27% of the total staked Ether.
Custody solutions are available to investment institutions in Dubai, the United Arab Emirates, and Jersey, a self-governing territory of the British Isles.
This product provides a compliance pathway to access returns from Ethereum staking at a time when many investment institutions are diversifying into digital assets.
In a recent interview, Gilbert said: "Many asset managers, custody services, family offices, and crypto investment firms are actively exploring staking strategies."
At the same time, U.S. ETF issuers are awaiting regulatory clarity as they launch Ethereum staking ETFs.
Despite underperformance: "Institutions find liquidity staking tokens like stETH useful because they directly address the challenges of locking up capital and complex custody agreements."
Tokens like stETH provide immediate liquidity and are compatible with qualified custody units like Komainu, Fireblocks, and Copper.
Custody solutions can drive ETH adoption, the crypto asset of institutions.
Lido's push for institutional adoption has accelerated in recent months, marked by the launch of Lido v3, which features modular smart contracts designed to help institutions meet regulatory compliance requirements.
Gilbert stated that custody solutions are necessary for certain institutions, such as asset management firms and family offices, according to strict risk management and compliance frameworks.
"Traditionally, limiting managed custody units or MPC wallet providers supporting stETH has been a barrier for these institutions," he said.
This contrasts with crypto companies, which are often more comfortable managing cryptocurrency assets directly and are generally willing to forego third-party custody solutions.
Gilbert stated that staked Ether tokens like stETH are increasingly being used by both traditional and crypto institutions to access Ethereum staking rewards without locking up capital for long periods.
These tokens also provide liquidity benefits through DeFi, CeFi, and OTC trading markets.
For these reasons, demand for staked Ethereum has surged. Last week, the amount of staked Ether on the Beacon Chain reached a new record high.
