In a recent interview, Matt Leisinger, the chief product officer at Alluvial, discussed crypto staking and how to attract institutional players to the sector. The Alluvial executive also shares his views on the Liquid Collective protocol and the future of Ether staking following the Shanghai upgrade.
Leisinger’s Expertise And Relevance
Having begun his professional journey in the conventional finance industry, Matt Leisinger transitioned to trading cryptocurrencies in 2016. With a vested interest in the Ethereum ecosystem, he invested in it and actively participated in various projects offering liquid staking solutions.
Leisinger says liquid staking involves staking assets on the blockchain and generating a receipt token representing the staked assets. This, in turn, ensures that users continue to maintain liquidity while simultaneously earning rewards and contributing to the network’s security.
With the increasing inflow of institutional investments into the crypto market, many are exploring the possibility of incorporating staking into their investment portfolio.
Leisinger believes liquid staking would be the preferred choice for most institutional investors. However, he opined that they would face challenges such as compliance with Anti-Money Laundering and Know Your Customer regulations, ensuring transparency, safeguarding token holder rights, and mitigating counter-party risks that must be addressed beforehand.
According to Leisinger, Alluvial has devised a solution to address these obstacles that impede enterprises’ adoption of liquid staking. Regarding regulations, Leisinger emphasizes the significance of having regulatory clarity and states that companies like Alluvial earnestly desire it.
He further said that staking can be classified into direct and actively managed.
The Regulatory Uncertainty
Leisinger acknowledged that the absence of regulatory clarity has harmed institutional staking. However, he remains optimistic about its future.
He also believes that upcoming developments, such as the Ethereum Shapella upgrade, will reduce the risk in staking. Instead, it would stimulate interest and increase participation among institutional investors.
From a broader perspective, the need for regulatory certainty in the crypto industry has been the most significant hurdle preventing more institutional players from joining the market. While institutional and corporate interest in crypto, DeFi, Web3, and other blockchain-powered solutions has surged significantly, several governments and regulatory authorities remain uncertain about regulating digital assets.
Consequently, institutional participants such as asset managers, pension funds, and insurance firms continue to stay on the sidelines and observe the cryptocurrency market from a distance. Moreover, the absence of clear regulatory frameworks, and persistent issues of liquidity and security across the broader crypto landscape, are significant concerns for institutional investors.
Hence, they are exercising caution and withholding their significant financial treasure chest. Since institutional investors have much larger amounts to invest in the crypto industry, it is no surprise that they have more stringent requirements before investing.
They won’t mind investing so long there is proper regulatory compliance and sufficient liquidity and security measures in the industry. However, these needs have not been fully met.
Hence, institutional investment in the broader digital asset ecosystem remains low. While a small percentage of institutional investors have invested in the crypto ecosystem, it represents only a fraction of the funds large institutions currently manage.
Although this is a promising start, experts believe there is still a long way to go before institutional investors fully embrace the potential of cryptocurrencies and blockchain technology.