Reported by The Block: Kraken has launched bitcoin “staking” through a new integration with the DeFi protocol Babylon.
Users can earn up to 1% APR on bitcoin held via the crypto exchange without bridging, wrapping, or lending it out.
Crypto exchange Kraken has launched bitcoin "staking" via a new integration with DeFi protocol Babylon, enabling users to earn passive rewards on their spot BTC holdings.
Kraken users can choose to "stake" their bitcoin directly from Kraken, which is then delegated via Babylon to secure Proof-of-Stake networks, with rewards paid out weekly in Babylon's native BABY token.
Clients retain full ownership of their BTC, which remains on the Bitcoin blockchain, with rewards managed by a verifiable smart contract and protected by cryptographic safeguards, according to a statement released by Kraken on Thursday. Users can "stake" their BTC instantly, but unstaking triggers a seven-day unbonding period during which no rewards are earned. The feature is only available in the United States (excluding California, Maine, Maryland, New Jersey, New York, Washington, and Wisconsin), the United Kingdom, Australia, and the United Arab Emirates.
"A substantial amount of bitcoin currently sits idle on our exchange, representing a significant opportunity cost for clients and a missed opportunity for the broader ecosystem," Kraken Global Head of Consumer Mark Greenberg said. "With this launch, clients can now earn a return on their BTC while also enabling emerging PoS blockchains to benefit from the economic weight of Bitcoin in order to validate transactions and bolster the security of their networks."
Kraken is the first major crypto exchange to offer a staking-style yield on native BTC using Babylon's time-lock-based protocol, without wrapping, bridging, or lending it out. Some platforms, such as Crypto.com, offer interest on bitcoin through "earn" programs, but these involve lending and carry additional counterparty risk.
"For a long time, people assumed bitcoin staking wasn't possible. Not because it was a bad idea, but because the infrastructure didn't exist," Kraken co-CEO Arjun Sethi said on X. "Bitcoin wasn’t built to support staking. There's no native delegation, no smart contracts, no slashing conditions. So the best you could do with your bitcoin was hold it, hope it appreciates, or trust it to a third party who might lend it out in ways you cannot see."
"The problem is that Bitcoin is the most secure monetary network on earth, but also one of the least productive. More than a trillion dollars of BTC are sitting idle," Sethi continued. "Until recently, there was no credible way to make it do anything else. With the emergence of new protocols, especially Babylon and other Bitcoin-aligned staking layers, there is now a path to earn native yield on Bitcoin without giving up control. We are excited to support it."
Kraken was one of the first crypto exchanges to introduce custodial staking in 2019, enabling users to gain rewards from various lockchain protocols, including Ethereum, Solana, and Polygon.
How does it work?While Babylon is marketed as a "bitcoin-native staking protocol," it does not enable bitcoin-native staking in the way proof-of-stake systems work. Instead, Babylon allows holders to lock their BTC non-custodially via a time-lock on Bitcoin's base layer and secure PoS chains in exchange for rewards. The BTC never leaves the Bitcoin network — it's time-locked using native Taproot scripts (Tapscript), enabling secure delegation without wrapping or bridging to other chains. PoS chains then reference these time-locked BTC commitments and use them as a security layer, rewarding participants via their own tokens. Babylon integrates with chains, including Ethereum, Solana, Chainlink, Avalanche, and Sui, allowing a single BTC stake to enhance security across all supported networks, with Babylon's own Genesis PoS chain functioning as a finality layer.
It's not staking in the native Bitcoin protocol because Bitcoin does not support staking — Bitcoin is a Proof-of-Work chain with no inflation-based staking mechanism. The yield doesn't come in BTC either — it's typically paid in another token like BABY and is distinct from lending-based interest programs. A more accurate way to think of it would be bitcoin-backed economic security for PoS chains or bitcoin time-locked collateral for external yield.
Even though Babylon avoids wrapped BTC and Kraken adds a more user-friendly layer, participants still face lockup immobility, offchain coordination risks, reward token volatility, and centralized custodial exposure — far from risk-free or equivalent to PoS staking models.
Babylon launched phase one of its self-custodial bitcoin staking protocol in August 2024, then rolled out its Genesis mainnet during phase two this April. The same month, crypto insurance provider Nexus Mutual announced it is developing several cover options tailored to different participants on the Babylon network, including individual stakers and institutions.
Babylon recently airdropped 600 million BABY tokens — 6% of its 10 billion total supply — to early supporters. BABY serves as the native token for transaction fees, governance participation, staking, and security on the Babylon Genesis chain. The token is currently trading for $0.05, according to The Block's Babylon price page, equating to a $113 million market cap and $493 million fully diluted value.
Babylon raised an $8 million seed funding round disclosed in March 2023, an $18 million Series A co-led by Polychain Capital and Hack VC in late 2023, and an additional $70 million funding round led by Paradigm around the time of its testnet launch in 2024.
Kraken's expanding product suiteKraken has introduced several new initiatives in recent months, including incubating its own Ethereum Layer 2 blockchain Ink, expanding its regulated crypto derivatives offerings in Europe, venturing into commission-free stock trading in the U.S., and plans to launch tokenized stock trading for Apple, Nvidia, and others outside the U.S.
In March, Kraken also agreed to acquire NinjaTrader for $1.5 billion in the largest-ever crypto and tradfi deal, designed to accelerate Kraken’s multi-asset-class ambitions.
More recently, it launched a full-service prime brokerage tailored for institutional clients earlier this month. On Tuesday, Ink also announced plans to launch and airdrop its new INK token.
