EXCLUSIVE: Bitcoin ETFs With Staking Could Transform Institutional Adoption, Says Bitlayer Co-Founder

Bitcoin (CRYPTO: BTC) exchange-traded funds (ETFs) offering staking capabilities could significantly boost institutional engagement by putting idle assets to work, according to Charlie Hu, co-founder of Bitlayer, a Bitcoin Layer 2 solution provider.

In an interview with Benzinga on the sidelines of Eth Denver on Thursday, Hu highlighted the potential regulatory approval of staking ETFs as a pivotal development, emphasizing their role in activating Bitcoin held in custody for yield generation.

His comments come as Bitcoin Layer 2s gain traction for enhancing scalability and utility.

Hu highlighted the current limitations of Bitcoin ETFs, which have seen over $100 billion in buy pressure since their approval last year.

"SEC approving the Bitcoin ETF staking. That's the one speculating, we don't know when exactly and whether or not it's going to happen," he said, expressing hope for approval in 2025.

He noted that such a move would allow ETF firms to shift Bitcoin from passive custody to active use, a change he believes could reshape institutional participation in the crypto market.

Drawing on his experience with Polygon (CRYPTO: POL) and Polkadot (CRYPTO: DOT), Hu suggested several economic and security benefits of Bitcoin rollups over sidechains.

"Once we have an ecosystem, we have a lot of transactions, we're going to contribute in the fees with the Bitcoin settlement," he explained, detailing how Bitlayer's 28 million transactions on its mainnet are already generating fees for Bitcoin miners.

He argued that this alignment supports the network's security budget, as halving events reduce miner rewards, a critical issue for Bitcoin's long-term resilience.

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Hu also addressed Bitcoin's evolution from digital gold to a broader financial tool, driven by Layer 2 innovations.

"A lot of the Bitcoin has been sitting on the cold wallet not doing anything, not getting any yield, not any interest in the last 10 years, 15 years," he said, suggesting that staking and DeFi use cases could meet growing demand from new users and institutions.

Bitlayer's approach, leveraging zero-knowledge proofs and BitVM for trust-minimized bridging, aims to unlock this potential, though he acknowledged challenges in balancing cost and security for on-chain settlement.

Looking ahead, Hu sees Bitcoin Layer 2s enabling decentralized payments, stablecoins, and on-chain options markets within five years.

However, his focus on staking ETFs highlights a near-term opportunity to integrate institutional capital with Bitcoin's expanding ecosystem, potentially catalyzed by regulatory clarity under a pro-crypto U.S. administration.

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Image created using artificial intelligence via Midjourney.