Organizations are rushing into Ethereum staking despite the weakening ETH price.

According to Kean Gilbert, head of partnerships at Lido Ecosystem Foundation, Ethereum (ETH) has underperformed compared to Bitcoin and other digital assets in the current market cycle, but institutional interest in Ethereum staking is driving demand for custodial solutions to support more investors.

On May 27, Komainu, a regulated digital asset custody service provider, began offering custody support for Lido Staked ETH, the largest staking token of Ethereum, accounting for 27% of the total staked Ether.

Custody solutions are available for investment institutions in Dubai, the United Arab Emirates, and Jersey, a self-governing territory of the British Isles.

This product provides a compliance pathway to access profits from staking Ethereum at a time when many investment institutions are diversifying into digital assets.

In a recent interview, Gilbert said: "Many asset managers, custody services, family offices, and crypto investment firms are actively exploring staking strategies."

At the same time, U.S. ETF issuers are awaiting regulatory clarity as they launch Ethereum ETF staking funds.

Although the operation is inefficient: "Organizations find liquidity staking tokens like stETH useful as they directly address the challenges related to capital locking and complex custody agreements."

Tokens like stETH provide instant liquidity and are compatible with qualified custodial units such as Komainu, Fireblocks, and Copper.

ETH/USD has decreased by 24% this year and 36% in the past 6 months | Source: TradingView## Custody solutions could drive the adoption of ETH, the digital asset of institutions

Lido's push for institutional adoption has accelerated in recent months, marked by the launch of Lido v3, featuring modular smart contracts designed to help institutions meet regulatory compliance requirements.

Gilbert said that custody solutions are necessary for certain organizations, such as asset management companies and family offices, according to the risk management and compliance framework.

"Traditionally, limiting managed custodial units or MPC wallet providers supporting stETH is a barrier for these institutions," he said.

This contrasts with crypto companies, which are often more comfortable managing digital assets directly and are usually willing to forgo third-party custody solutions.

Gilbert stated that staked Ether tokens like stETH are increasingly being used by traditional and cryptocurrency institutions to access Ethereum staking rewards without needing to lock up capital for a long time.

These tokens also provide liquidity benefits through DeFi, CeFi, and the OTC trading market.

For these reasons, the demand for staked Ethereum has surged. Last week, the amount of staked Ether on the Beacon Chain reached a new record level.

Staked ETH on Beacon Chain has reached a record level of 34.7 million ETH on June 12 | Source: Beaconcha.inVincent