According to Bloomberg, Hong Kong is contemplating the introduction of staking for exchange-traded funds (ETFs) that invest directly in cryptocurrencies. The Securities and Futures Commission (SFC) has been in discussions with the city's crypto ETF issuers about offering staking services through licensed platforms. These discussions have been prompted by recent proposals, but there is currently no definitive timeline for a decision.
If approved, staking yields could increase demand for Hong Kong's spot-crypto ETFs, which have seen only moderate interest since their launch in April. This move could also give Hong Kong an advantage over the US, where similar initiatives are being considered. Staking allows investors to earn passive income by locking tokens on the Ethereum network to assist in validating transactions. Currently, Ether staking pays out an equivalent amount.
Serra Wei, CEO of Aegis Custody, stated that the discussions between Hong Kong ETF issuers and regulators on staking have been 'healthy'. She believes that it would align with the local regulatory framework. Aegis provides custody technology solutions to banks in Hong Kong. Wei, who has not been involved in the discussions with the SFC, said that it would be a significant achievement for Hong Kong to incorporate staking into spot-ETH ETFs.
Hong Kong is competing with cities like Singapore and Dubai to become a hub for digital assets, following the implementation of a dedicated regulatory regime last year. The city is working to restore its reputation as a modern financial center after a crackdown on dissent tarnished its appeal. In addition to ETFs, Hong Kong is considering several applications to expand its list of licensed digital asset exchanges. The city is also developing a framework for stablecoins, which are usually pegged 1-1 to fiat currency and backed by reserves of cash and bonds.