Galaxy Digital (TSX:GLXY), the cryptocurrency trading company led by Mike Novogratz, announced it is partnering with BitGo Trust to offer blockchain staking services.
This collaboration comes despite an ongoing legal dispute between the two firms. Galaxy Digital's staking and validator services, which oversee more than $4 billion in staked crypto assets, will now be accessible to BitGo's institutional clients. These services allow investors to earn rewards from staking, while simultaneously using their assets as collateral for loans and trading on Galaxy's platform.
The partnership persists even after Galaxy Digital backed out of an acquisition deal with BitGo in early 2023, leading to a $100 million lawsuit from BitGo for allegedly breaching their May 2021 merger agreement. In a joint statement, the companies expressed their commitment to enhancing the adoption of digital assets and continuing strategic collaboration, despite the ongoing legal proceedings, which they consider a separate issue.
Staking, a process where crypto tokens are locked to support blockchain operations in exchange for rewards, is expected to grow significantly in the United States under the current pro-crypto administration. Galaxy has been expanding its non-custodial staking infrastructure, including the acquisition of blockchain node operator CryptoManufaktur (CMF) in July of the previous year.
Zane Glauber, head of Galaxy’s Blockchain Infrastructure team, emphasized the benefits of combining custodial services with Galaxy's trading environment. He explained that assets in custody could be used as collateral, offering customers enhanced products and the ability to borrow cash or engage in derivative strategies.
With a crypto-friendly U.S. government in place, there is speculation about when staking will be incorporated into exchange-traded funds (ETFs), particularly for proof-of-stake tokens like Ethereum's ether (ETH). Glauber pointed out that fund managers must consider liquidity risk when assets are locked up for staking, and mentioned that financial products overlaying staking can mitigate these concerns by providing liquidity through collateralized asset suites.
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