Kraken Integrates Babylon for Native Bitcoin Staking, Tapping Into $4.6 Billion BTCFi Market

Kraken, a leading cryptocurrency exchange, has launched a native Bitcoin staking service through an integration with the Babylon Bitcoin Staking Protocol, enabling users to earn rewards on their idle BTC without leaving the Bitcoin blockchain.

Kraken’s Bitcoin Staking: Unlocking New Opportunities

Kraken’s new offering allows users to stake their Bitcoin directly on the Bitcoin blockchain, locking it in custodial vaults and delegating it to proof-of-stake (PoS) networks via the Babylon protocol. Users earn rewards in BABY, the native token of Babylon Genesis, without needing to bridge, wrap, or lend their BTC.

Kraken’s Global Head of Consumer, Mark Greenberg highlighted the significance of this service: “A substantial amount of bitcoin currently sits idle on our exchange, representing a significant opportunity cost for clients and a missed opportunity for the broader ecosystem. With this launch, clients can now earn a return on their BTC while also enabling emerging PoS blockchains to benefit from the economic weight of Bitcoin in order to validate transactions and bolster the security of their networks” .

The service ensures transparency and security through Bitcoin scripts and cryptographic safeguards, with users able to unstake their BTC after a seven-day unbonding period.

BABY token prices surged nearly 5% following the announcement, reflecting market optimism about the integration. Kraken’s initiative follows similar moves by exchanges like Binance and BitGo, which also leverage Babylon for BTC staking, highlighting the growing adoption of this model.

Babylon Protocol: Powering Trust-Minimized Staking

The Babylon Bitcoin Staking Protocol enables BTC holders to stake their assets without moving them off the Bitcoin blockchain, a significant advancement for trust-minimized DeFi.

Clayton Menzel, head of business development at Babylon Labs, described the integration’s impact: “This showcases how trust-minimized staking without bridging can operate at scale”.

The protocol locks BTC in native chain vaults and delegates it to PoS networks, ensuring the security of next-generation blockchains while rewarding users with BABY tokens.Since Phase 1 of the Babylon mainnet launched in August 2024, over 57,000 BTC—worth approximately $4.6 billion—have been staked, with the Genesis mainnet launch in April 2025 further advancing the protocol. Participation from institutional players like Hex Trust and Figment signals strong institutional interest.

The protocol’s design eliminates the need for bridging or wrapping, reducing risks associated with cross-chain transfers. Users can earn annual yields of up to 1% in BABY tokens, offering BTC holders a yield-generating avenue without compromising on-chain integrity.

The Rise of BTCFi: A Growing Ecosystem

The launch aligns with the rapid expansion of Bitcoin DeFi, which is unlocking new use cases for the world’s largest cryptocurrency.

A Binance Research report from March 2025 revealed that only 0.8% of Bitcoin’s supply is currently used in DeFi, indicating vast untapped potential. The total locked value (TVL) in BTCFi has surged by over 2,700% in the past year, driven by projects like Stacks, Rootstock, and the Lightning Network. These developments are transforming Bitcoin’s role, enabling it to secure PoS networks and generate yield for holders.

Kraken’s staking service is part of its broader push into diversified offerings, including recent expansions into stock and ETF trading in select U.S. states. As BTCFi gains traction, Kraken’s integration with Babylon positions it at the forefront of this evolving ecosystem, offering users a secure and accessible way to participate in Bitcoin’s DeFi revolution.