Crypto Analyzer

Hong Kong Considers Approval for Ether ETF Staking, Diverging from US Approach

Hong Kong is contemplating the possibility of allowing staking for exchange-traded funds that directly invest in Ether, a move that could provide a new avenue for generating passive income. This potential development stands in contrast to the United States, where plans for staking in Ether ETFs have been shelved by prominent issuers.

The Securities and Futures Commission of Hong Kong has engaged in discussions with local crypto ETF issuers regarding the provision of staking services through licensed platforms. These talks have been ongoing, and while there is no set timeline for a decision, insiders familiar with the matter have revealed that proposals have been under consideration in recent weeks. The Securities and Futures Commission has not yet provided any official comments on the matter.

If approved, staking could enhance the appeal of Hong Kong’s spot-crypto ETFs, which have seen subdued demand since their launch in April. Additionally, this move could position Hong Kong ahead of the US in this aspect, as the US has shown signs of potentially approving spot-Ether ETFs without incorporating staking features.

In the US, major issuers like Fidelity Investments and Ark Investment Management have opted against including staking in their proposed Ether ETF products. While this decision may assist in navigating regulatory hurdles in the US, it could make these funds less attractive compared to purchasing Ether directly from crypto exchanges. Staking enables investors to earn passive income by locking tokens on the Ethereum network to facilitate transaction validation. Currently, Ether staking offers an annual yield of approximately 4% in the form of additional coins.

Serra Wei, the CEO of Aegis Custody, a provider of custody technology solutions to banks in Hong Kong, noted that discussions between ETF issuers and regulators in Hong Kong regarding staking have been positive. Wei highlighted that integrating staking into spot-Ether ETFs would align with the local regulatory framework and could signify a significant milestone for Hong Kong in the digital asset space.

Hong Kong is striving to establish itself as a prominent digital asset hub, competing with jurisdictions like Singapore and Dubai. The city introduced a dedicated regulatory regime for digital assets last year and is aiming to bolster its position as a modern financial center following recent challenges that impacted its reputation.