Hong Kong Considering To Bring Ethereum Staking for ETF Issuers

Hong Kong is considering the integration of staking services into Ethereum-based exchange-traded funds (ETFs). The Securities and Futures Commission (SFC) and local ETF issuers are actively discussing this potential enhancement, according to a May 23 report from Bloomberg. 

These discussions are ongoing, and there is no fixed timeline for implementation. The sources, who requested anonymity, indicated that the SFC is still fielding proposals and evaluating the feasibility of this integration. 

The SFC's approach contrasts sharply with the U.S. Securities and Exchange Commission (SEC). 

The US SEC views staking services as an investment contract, thereby violating securities laws. This stance led to major financial institutions, like Fidelity, removing staking from their latest S1 filings for spot ETH ETFs.

Staking allows investors to commit their crypto holdings to support network operations, earning them a potential yield. This addition could provide ETF investors with a passive income in addition to potential capital appreciation. 

This move could also support Hong Kong's global crypto hub ambitions. Serra Wei, CEO of Aegis Custody, remarked, "It would be a milestone for Hong Kong to add staking into spot-ETH ETFs."

Current Performance of Hong Kong ETFs

Hong Kong introduced Asia's first spot bitcoin and ether ETFs, managed by China Asset Management (ChinaAMC), Harvest Global, and Bosera/HashKey, on April 30.

However, these ETFs have seen minimal inflows, contrasting sharply with the $154 million worth of inflows into U.S. spot Bitcoin ETFs in a single day. The introduction of staking might help revive interest and flow into these products.

However, Hong Kong's ambitions extend beyond ETFs. The region is also examining applications to expand its array of licensed digital-asset exchanges and is developing a framework for stablecoins. 

These efforts reflect a broader strategy to position Hong Kong as a leading global center for cryptocurrency and blockchain innovation.