BNY plans to offer institutional crypto staking through Galaxy, which already stakes ETH for BlackRock's ETF. One provider could hold enough stake to disrupt network finality.
BNY Mellon's Digital Asset Custody platform plans to offer institutional crypto staking support through Galaxy's infrastructure, the two firms said Aug. 4.
BNY holds roughly $62.6 trillion in assets under custody and administration, touching about 20% of the world's investable assets. Galaxy is one of three validator firms approved to stake Ethereum for BlackRock's iShares Staked Ethereum Trust (ETHB). The prospectus says the fund can stake 70% to 95% of its holdings under normal conditions.
Two of Wall Street's largest institutions now route staking through the same provider. Galaxy also runs validators for Solana and other proof-of-stake networks, extending that overlap across multiple chains.
ETHB owns the ETH and collects staking rewards. The custodian holds the private keys and controls withdrawals. Galaxy and the other approved validators hold validator keys and perform validation work. The prospectus states they never gain keys to move the trust's staked ETH.
That structure is safer than handing tokens to a validator. Still, the shareholder who owns the economic exposure has no say in how the validator behaves once it is running. The investor supplies the stake and collects the yield. The product sponsor – an ETF issuer or a bank – decides staking allocation and disclosure. The custodian holds keys and withdrawal authority. The staking provider runs the validator itself, and its choices of cloud infrastructure, client software, and compliance policy become the network's exposure.
Validators receive no token-weighted votes on Ethereum improvement proposals. Their power lies in block production, transaction inclusion, and finality. Ethereum's documentation says validators controlling more than 33% of staked ETH can prevent the chain from finalizing blocks if they go offline or attest incorrectly. A share above 66% can finalize a preferred version of the chain outright.
Exchanges and DeFi protocols lean on finality to decide when a transaction is safe to treat as settled.
Solana labels the smallest group that can control roughly 33% of delegated stake a superminority. Nakaflow reporting put the Nakamoto coefficient at 10 as of Aug. 5 – the minimum number of validators needed to reach that share. A coordinated failure within such a small group can stop the network from voting on new blocks in real time.
The Invesco Galaxy Solana ETF filing lists Coinbase Custody as the staking provider and node operator for the fund's SOL, with BNY Mellon acting as administrator.
About 33% of ETH's total supply is currently staked. Routing roughly 11% of all ETH through a single provider would put that provider near the one-third threshold for currently staked ETH. Solana's staking ratio is around 68% of supply, so reaching that same share of active stake there would require about 22.7% of total SOL supply.
Figment's report for the second quarter puts its Ethereum validators at 6.26% of all staked ETH and its Solana validators at 6.96% of all staked SOL. Both numbers show how much active stake a single mid-size institutional operator can already carry.
The custodian controls the withdrawal route and private keys. Its failure or compromise can freeze customer funds even when the validator behaves correctly. ETHB's prospectus warns that slashing, inactivity penalties, and correlated penalties across many validators can cause losses the trust may never recover from, particularly if those validators share one staking provider.
Many institutional validators may end up using the same client software or key management vendor. When that happens, a single bug or outage can spread across every validator that shares the same setup. The prospectus cites Ethereum's May 2023 finality disruption as an example.
A single staking provider running validators for several banks and funds can apply one sanctions or transaction-filtering policy across all of them, producing a coordinated inclusion policy without anyone formally colluding to create one.
The more dangerous version needs no bad actor – just ordinary institutional habits. Banks favor approved vendors. Funds minimize operational risk by choosing the same infrastructure. Custody products simplify customer choice until validator selection and voting rights quietly disappear.
Ethereum's own community is already arguing about a version of this problem. EIP-8361 would burn a larger share of validator rewards as the staking ratio rises, aiming to reduce the incentive to keep piling ETH into staking. Its authors cite custodial concentration as one of their reasons for proposing it.
A 2025 paper on Ethereum's staking market found that solo stakers respond to changes in rewards more than centralized exchanges or liquid-staking providers do. Cutting issuance could push smaller, independent validators out first, leaving the remaining stake even more concentrated among the institutions the proposal is trying to rein in.
The bull case has disclosure catching up before concentration does. Products start publishing which validators hold customers' stakes, cap how much of a single provider's book comes from any one client, and diversify the clients and compliance policies underlying them. Wall Street adds real stake to Ethereum and Solana without creating a single operational chokepoint.
The bear case has yield-chasing outrunning disclosure. Staking becomes a default checkbox inside custody accounts and ETFs. Investors never see which validator holds their stake. A handful of approved providers end up running a large share of active validators across several major networks at once. Product brands keep multiplying while the operators underneath them keep consolidating.
Investors who assumed five institutional brands meant five independent risks discover they were exposed to the same two or three operators the entire time.
The next fight blockchains will have to endure will be over who operates the stake behind them.
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