Why Institutions Need a Staking Policy Before a Staking Strategy

Treating validators as interchangeable ignores critical performance and risk differentials. A single slashing event can wipe out years of yield.

• Slashing Risk Range: 0.1% to 1%+ annualized, depending on client diversity and operator skill.
• Uptime Premium: Top-tier operators maintain >99.9% effectiveness; laggards can miss 5-10% of rewards.
• Client Diversity: Reliance on a single execution/consensus client (e.g., Geth) exposes you to correlated failures.

Chasing the highest advertised APY ignores hidden costs and tax inefficiencies. The net return is what hits your treasury.

• Hidden Costs: Infrastructure fees, custody fees, and gas for compounding can shave 50-150 bps off gross yield.
• Tax Drag: In many jurisdictions, staking rewards are income at receipt. Without a policy for frequent harvesting, you face a massive, illiquid tax liability.
• Opportunity Cost: Locked, non-liquid staked ETH cannot be used as collateral in DeFi (e.g., Maker, Aave) or for restaking protocols like EigenLayer without complex derivatives.

Ad-hoc delegation exposes you to opaque validator performance. A policy defines acceptable slashing risk, validator due diligence, and real-time monitoring thresholds.

• Mitigate catastrophic losses from double-signing or downtime.
• Mandate diversification across geographies and clients (e.g., Prysm, Lighthouse).
• Require insurance or coverage from providers like Coinbase Institutional or Figment.

Staking across multiple chains (Ethereum, Solana, Cosmos) without a unified policy creates operational silos and trapped capital.

• Centralize view of rewards, unbonding periods, and withdrawal credentials.
• Automate re-staking decisions vs. liquidity provisioning via Lido or EigenLayer.
• Define custody standards for hot vs. cold key management, separating consensus and withdrawal keys.

Staking rewards are treated differently across jurisdictions (property vs. income). An ad-hoc strategy invites compliance overhead and tax inefficiency.

• Document reward accrual method (e.g., daily vs. at withdrawal) for precise reporting.
• Structure entity location and validator selection to optimize for regulatory clarity.
• Integrate with accounting platforms like Bitwave or Cryptio from day one.

Choosing a validator is a political and economic act. A policy must define your stance on Maximal Extractable Value (MEV) and transaction filtering.

• Audit validator compliance with OFAC sanctions lists.
• Quantify MEV boost revenue potential via Flashbots-aligned builders.
• Balance profit against decentralization and network health principles.

Relying on third-party liquid staking tokens (LSTs) or re-staking pools introduces systemic dependencies. A policy assesses and limits this exposure.

• Cap allocation to any single LST (e.g., stETH, rETH).
• Evaluate audit history and governance centralization of protocols like Lido or Rocket Pool.
• Model de-peg scenarios and liquidity during market stress.

Manual staking operations don't scale. Without a policy mandating automation, you bleed efficiency on key management, reward compounding, and reporting.

• Automate reward claiming and re-delegation to optimize APY.
• Implement multi-sig or MPC workflows for validator management.
• Use dedicated infrastructure from Blockdaemon or Kiln to reduce overhead.

Delegating to a third-party custodian like Coinbase or Figment creates a single point of failure and forfeits direct chain participation rights. A policy must define the acceptable custody model.

• Mandate: Define clear thresholds for self-custody vs. qualified custodians.
• Benefit: Retain control of validator keys, enabling direct governance participation and slashing defense.

A single validator misconfiguration can trigger an automatic, non-reversible penalty of 32+ ETH. Without a policy, this is an operational and balance sheet catastrophe.

• Mandate: Establish maximum allowable slashing risk per validator and define a rapid response protocol.
• Benefit: Quantify and cap financial exposure, protecting the treasury and institutional reputation.

Staking rewards are taxed and regulated differently in every jurisdiction. The SEC's stance on staking-as-a-service is ambiguous. A policy provides the audit trail for regulators.

• Mandate: Document the legal rationale for asset classification (not a security) and tax treatment of rewards.
• Benefit: Create a defensible position for auditors and regulators, reducing legal liability.

Staking with a single provider like Lido or Rocket Pool exposes you to their smart contract and centralization risks. A policy enforces diversification.

• Mandate: Set maximum allocation limits to any single staking pool, client, or cloud region.
• Benefit: Mitigate correlated failure risk and align with network health (avoiding >33% dominance).

Native staking imposes an unbonding period (e.g., ~27 days on Ethereum). Liquid staking tokens (LSTs) like stETH introduce depeg and composability risks. Policy dictates the acceptable trade-off.

• Mandate: Define the core-periphery model: what portion of ETH is locked for yield vs. kept liquid for operations.
• Benefit: Ensure operational liquidity while maximizing yield on strategic holdings.

During a network upgrade or slashing event, seconds matter. A policy removes ambiguity in decision-making and key access, preventing bureaucratic paralysis.

• Mandate: Establish a clear chain of command, multi-sig signer roster, and pre-approved action playbooks.
• Benefit: Enable sub-60-minute incident response, turning a potential crisis into a managed event.