Galaxy Digital Brings Staking Capabilities to BitGo Trust Despite Legal Spat

Galaxy Digital (GLXY), the cryptocurrency trading company helmed by Mike Novogratz, is bringing its blockchain staking capabilities to regulated custody specialist BitGo Trust

Cryptocurrency trading company Galaxy Digital (GLXY) is bringing its blockchain staking capabilities to BitGo Trust, a regulated custody specialist, despite the ongoing legal dispute between the two firms.

The partnership will see Galaxy's staking and validator services, which currently handles over $4 billion in staked crypto assets, being made available to BitGo's institutional custody clients. This will allow investors to earn staking rewards on their crypto assets while also using them as collateral for loans and trading on Galaxy's platform.

The move comes after Galaxy abandoned a deal to acquire BitGo in early 2023, leading the custody firm to file a $100 million lawsuit against Galaxy, alleging that the trading company intentionally breached their May 2021 merger agreement.

In light of the lawsuit and the new staking partnership, the firms issued a joint statement, saying:

"Galaxy and BitGo both see an incredible opportunity to further drive adoption of digital assets and remain committed to strategic collaboration despite ongoing legal proceedings, which are a separate matter."

Staking, a fundamental aspect of cryptocurrency that involves locking up tokens to support the operation of a blockchain in exchange for rewards, is poised to become increasingly vitalized in the U.S. under President Donald Trump's pro-crypto administration.

Galaxy has been building out its non-custodial staking infrastructure, having acquired blockchain node operator CryptoManufaktur, also known as CMF, in July of last year.

Being included in BitGo's lineup of staking providers entails being fully integrated and plugged into both ultra-secure, custodial services and the best of both worlds, according to Zane Glauber, head of Galaxy's Blockchain Infrastructure team.

"Galaxy's key differentiator is the enhanced products that can be made available to customers whose assets are sitting in a custodial relationship," Glauber said in an interview with Blockworks. "With some documentation, these assets can be accepted as collateral within our trading environment. So as well as sitting there staking, assets can be used to borrow cash, or as collateral to engage in some sort of derivative strategy."

With the advent of a crypto-friendly U.S. government, the question arises as to whether—not if—staking will be included in exchange-traded funds (ETFs) for underlying proof-of-stake tokens, such as ether (ETH) of the Ethereum blockchain.

Assuming that staking will be enabled in ETF products, the managers of these funds will need to think carefully about the trade-offs in terms of liquidity risk, Glauber noted.

"Staking locks up your assets for a predetermined amount of time, in Ethereum in particular, and un-bonding queues can be dynamic; they expand and contract based on supply and demand and on-chain dynamics," Glauber said. "An overlay of financial product helps ameliorate some of those issues, providing in kind liquidity is something that is enabled by access to this collateral product suite."