May 27, 2024
By Sharan Kaur Phillora
Hong Kong is actively exploring the integration of staking services into Ethereum-based exchange-traded funds (ETFs). The Securities and Futures Commission (SFC) and local ETF issuers are in discussions to evaluate this potential enhancement, as reported by Bloomberg on May 23. While these discussions are ongoing, no fixed timeline for implementation has been established.
Here’s what we know:
This move positions Hong Kong’s approach in stark contrast to that of the U.S. Securities and Exchange Commission (SEC), which considers staking services as an investment contract, thus subject to securities laws. This has led major financial institutions like Fidelity to exclude staking from their latest S1 filings for spot ETH ETFs.
Staking involves investors committing their crypto holdings to support network operations, offering them a potential yield. Introducing staking to ETFs could provide investors with a passive income stream, adding to the potential capital appreciation of their investments.
This initiative is part of Hong Kong’s broader strategy to establish itself as a global crypto hub. Serra Wei, CEO of Aegis Custody, highlighted the significance of this move, calling it a milestone for Hong Kong.
On April 30, Hong Kong introduced Asia’s first spot bitcoin and ether ETFs, managed by China Asset Management (ChinaAMC), Harvest Global, and Bosera/HashKey. However, these ETFs have seen minimal inflows compared to the $154 million into U.S. spot Bitcoin ETFs in a single day.
The inclusion of staking might revive interest and increase the flow into these products. Beyond ETFs, Hong Kong is also looking to expand its array of licensed digital-asset exchanges and develop a framework for stablecoins, reflecting its ambition to become a leading global center for cryptocurrency and blockchain innovation.
These developments mark significant progress in integrating traditional finance with digital assets, positioning Hong Kong as a key player in the rapidly evolving crypto landscape.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
