June 5, 2024
Hong Kong Considers Ether Staking for ETFs
Latest Cryptocurrency News

Hong Kong Considers Ether Staking for ETFs

Reports suggest that the Securities and Futures Commission (SFC) of Hong Kong is contemplating the inclusion of an Ether (ETH) staking option for spot ETH exchange-traded fund (ETF) issuers. According to Bloomberg, discussions have ensued within the financial regulator in Hong Kong regarding whether ETH ETF issuers should be permitted to stake Ether for passive income. The move comes after Hong Kong greenlit a Bitcoin (BTC) ETF earlier this year, following the United States’ approval of 10 spot ETFs, more than three months prior.

Office of The Securities and Futures Commission (SFC) in Quarry Bay. Photo: Yik Yeung-man

Regulatory Considerations and Industry Response

The SFC has engaged in talks with the country’s crypto ETF issuers regarding the provision of staking services via licensed platforms, following recent proposals. However, Bloomberg reports that the regulator is still deliberating on the matter, and there is no set timeline for implementation. This stance contrasts with the policy adopted by the U.S. Securities and Exchange Commission (SEC), which views staking services as an investment contract and a breach of securities laws.

Major financial institutions applying for spot ETH ETFs have adjusted their strategies accordingly. For instance, Fidelity omitted staking from its latest S1 filing. Crypto staking involves proof-of-reserve token-holders locking their crypto tokens for a specified period, earning a percentage of staked tokens as rewards. Despite this, the U.S. SEC classified staking services as securities last year, prompting platforms like Kraken to cease staking services in the United States.

Regulatory Dynamics and Market Implications

Coinbase, however, has contested the SEC’s stance on staking, arguing that core staking does not constitute a security as it does not involve an investment of money. Hong Kong’s regulatory approach to staking and ETFs reflects its growing prominence as a crypto-friendly jurisdiction in 2024. Despite being the first country to approve a spot ETH ETF before the United States, the response to its launch last month has been tepid. Nevertheless, the potential inclusion of staking options could attract new investment streams into the country’s ETF market.

The deliberations by the SFC underscore the evolving regulatory landscape surrounding cryptocurrencies and ETFs in Hong Kong. As discussions continue, market participants eagerly await further developments and potential opportunities arising from the integration of staking options within ETH ETFs.

Image by tawatchai07 on Freepik

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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