Hong Kong Eyes Ether ETF Staking to Outpace US

Friday, 24/05/2024 | 13:42 GMT by Jared Kirui

This regulatory change could provide a new source of passive income to investors.

This move is expected to give Hong Kong a competitive advantage over the US, where this offering is restricted.

Hong Kong is considering allowing staking for exchange-traded funds (ETFs) investing directly in ether. The Securities and Futures Commission (SFC) of Hong Kong is engaging the city’s cryptocurrency ETF issuers about providing staking services through licensed platforms, The Business Times reported.

Passive Crypto Income

This potential regulatory change could open a new source of passive income for investors, positioning Hong Kong ahead of the US, where such offering is restricted. Staking offers investors a way to earn passive income by locking tokens on the Ethereum network to help validate transactions, currently yielding about 4% annually in additional coins.

If the SFC approves the staking yields, it could significantly enhance the attractiveness of Hong Kong’s spot-crypto ETFs, which have experienced moderate demand since their launch in April. This move could give Hong Kong a competitive edge over the US, which recently approved spot ether ETFs applications by Nasdaq, Cboe, and NYSE.

Hong Kong is actively positioning itself as a digital asset hub, competing with cities like Singapore and Dubai. This follows the implementation of a dedicated regulatory regime last year aimed at rejuvenating the city’s status as a financial center after a period of political unrest.

Beyond ETFs, Hong Kong is reviewing several applications to increase the number of licensed digital asset exchanges. Additionally, it is developing a framework for stablecoins, which are typically pegged to fiat currencies and backed by reserves of cash and bonds.

In a significant development, the US SEC approved applications from major exchanges like Nasdaq, CBOE, and the NYSE to list ETFs tied to the price of ether yesterday (Thursday). This milestone potentially paves the way for the launch of these funds later in the year, pending regulatory formalities and investor disclosures.

US Grants Partial Approval for Ether ETFs

As the SEC deadline to decide the fate of several applications for ether ETFs approached, major asset management firms, including BlackRock, Grayscale, and Bitwise, made significant adjustments to their applications. These adjustments entailed removing provisions for staking.

While staking offers an avenue for generating passive income, the US regulators view it as constituting the offering of unregistered securities. Hence, companies like BlackRock have explicitly stated in their amended filings that they will not engage in actions related to staking or additional yield generation using the ether held by their ETFs.