BitGo launches Bitcoin staking with Stacks in qualified custody

The new service, launched through BitGo Bank & Trust, allows institutional clients to stake bitcoin while keeping it in qualified custody. Participants must maintain a paired $STX position worth 5% of the staked bitcoin's value. The integration uses PoX-5, the bootstrap phase of Stacks' Proof-of-Transfer mechanism, where bitcoin remains with the custodian while the paired $STX is locked on Stacks.

According to BitGo's announcement, the service is separate from their Gokubu consumer card and is currently limited to institutional partners managed by Stacks Labs. Clients can stake directly from their existing BitGo accounts, with BitGo claiming rewards on their behalf after registering their position with the protocol.

Bitcoin payouts with second asset at risk

The integration features a bond term of approximately six months, with standard Bitcoin script timelocking the principal. While clients receive bitcoin payouts, they remain exposed to the market value of the paired $STX throughout the lock period. The service offers weekly bitcoin distributions over the bonding period, with a target yield set before each period opens.

Stacks miners supply the rewards by spending bitcoin to compete for $STX block rewards and transaction fees. Active protocol bonds receive the target yield first, with excess miner revenue shared between participants staking only $STX and a reserve fund. The mechanism has distributed more than 4,200 BTC since January 2021, though this figure doesn't reflect the new BitGo integration.

Custody and liquidity considerations

BitGo emphasizes that the staking design leaves bitcoin unwrapped, unbridged and unloaned, with the qualified custodian holding the timelocked principal under the client's existing custody arrangement. While Stacks' documentation describes an optional early exit option where participants can release bitcoin before the period ends by forfeiting remaining yield, BitGo's disclosure states that staked bitcoin generally cannot be accessed until the bonding period ends.

Clients can route rewards to a different address than the staking address, keeping principal and rewards in separate balances. This feature is particularly useful for exchange-traded fund and exchange-traded product issuers requiring separate accounting. BitGo also clarifies that digital assets in qualified custody are not deposits and not FDIC insured, with no guarantee of protocol performance or rewards.

Whitelisted bonds before future open auctions

The public onboarding process requires both a bitcoin wallet and a $STX wallet. After clearing review, the Stacks Endowment approves addresses for the bonding period. Each period has fixed capacity allocated to approved participants before it opens, with new bonding periods opening approximately monthly and featuring overlapping six-month terms.

Future phases will transition from the current whitelist system to permissionless auctions run by a decentralized signer set. This transition requires a holder vote and a hard fork, though no activation date has been set. The exact rules for the auction, including bid format, clearing rules and minimums, remain undecided and will be decided through a vote once a proposal is drafted.