Staking as an Asset Class? This Swiss Institutional Fund Is Jumping In
While institutional investors around the world are just getting their heads around bitcoin (BTC, -1.43%), asset managers in crypto-friendly Switzerland are heading into staking on next-generation blockchain networks.
Announced Friday, Zurich-based investment firm Tavis Digital has partnered with Singapore-based Persistence, a bridge for traditional firms into undiscovered realms such as token staking and decentralized finance (DeFi). Tavis Digital is a spin-off of Tavis Capital, an asset manager regulated by the Swiss Financial Market Supervisory Authority (FINMA) with about $1.07 billion in assets under management.
Nimble and financially sophisticated countries like Switzerland and Singapore are ahead of the pack when it comes to cryptocurrency and its applications.
“We white-label our services to institutional clients and stakeholders who do not know how to run a validator node both on the software side as well as on the hardware side,” said Tushar Aggarwal, CEO and co-founder of Persistence. “It’s not a trivial thing to run a validator node, you need almost close to 100% uptime otherwise you get slashed.”
Persistence enables investors to get staking rewards (akin to interest) by participating in proof-of-stake (PoS) networks such as Cosmos, Polygon (formerly Matic), NEAR, SKALE, Terra and others. The tie-up with Tavis is a demonstration that some traditional funds are going beyond merely adding bitcoin as an asset class.
PoS systems eschew the Bitcoin blockchain’s energy-intensive method of ordering transactions so coins cannot be spent twice and propose to solve the “nothing at stake” problem by apportioning some skin in the game. Purchasing and holding tokens on a blockchain earns rewards for validating the order of transactions, but can result in losses (known as “slashing”) if a validating node goes offline or is unresponsive.
Direct participation in staking networks and all the validation node husbandry that goes with it is a complex business, and Persistence provides a complete handholding for firms that don’t want to spend time and money setting up dedicated blockchain teams. This hosting service earns Persistence about 1% on the assets being staked. The firm has some $260 million in assets under delegation, mostly on Cosmos.
“With backdrop of most parts of western Europe now at 0% interest rates, or negative interest rates in certain jurisdictions, there is an increased demand from institutional folks to generate fixed income yields,” said Aggarwal, adding:
“And that’s what Tavis Digital is trying to do – create this fixed income fund vehicle and generate returns from proof-of-stake mining as an asset class.”