The ability to stake crypto coins on a network and earn interest for doing so is nothing new at this point. Still, until today, there has not really been a staking service that targets institutional clients directly.
As of this morning, Coinbase is looking to change that. Starting with the Tezos network’s XTZ coin, they will be offering a 6.6 % return, counting their fees to hold client coins in cold storage. Due to this choice, it is reasonable to conclude that institutional investors already own a considerable amount of XTZ at this point.
Simultaneously, it’s reasonable to question this decision as well due to all of the controversy that surrounded the Tezos project last year. If you do not already know what this refers to, keep in mind that Tezos’s co-founder was penalized by regulators for essentially falsifying numbers related to Tezos, while he was working at Morgan Stanley.
On top of this, as CCN and others point out, there was also a class-action lawsuit that claimed Tezos was an unregistered securities offering, though even this fell under its’ share of controversy due to the alleged checkered past of one of its’ lead plaintiffs.
Despite all of this, Coinbase has still decided to start their institutional staking service with XTZ. Yes, as Coindesk points out, a 6.6% return is attractive to any investor, especially with 30-Year United States treasury bonds falling behind in this respect.
Still, investing in any crypto project is risky, especially for large-scale investors that are historically risk-averse. Because of this, Coinbase will offer full insurance for all staked funds. What speaks to the likely success of their endeavor for now is the fact that they already have institutional partners signed up for this service, ahead of its’ launch.
What will be interesting to see is what negative factors also arise from this, over time. For example, if institutions can be fully insured when they stake, what’s to stop risk-averse individual investors from calling for the same thing? Since Coinbase has said they are currently confident in the service’s performance over the next six months, it is reasonable to expect that this will become clear over that period of time.
By: BGN Editorial Staff