Hong Kong SFC considers allowing Ethereum staking for ETF issuers

Hong Kong’s Securities and Futures Commission is reportedly considering including an Ethereum staking option for issuers of spot ETH exchange-traded funds (ETFs).

According to a report published in Bloomberg, Hong Kong’s financial regulator is examining whether domestic ETH ETF issuers should be allowed to stake Ether (ETH) and earn passive income. Hong Kong approved a Bitcoin (BTC) ETF earlier this year, more than three months after the United States approved 10 spot ETFs.

The SFC has reportedly been in discussions with the country’s cryptocurrency ETF issuer about offering staking services through a licensed platform, after submitting a proposal in recent weeks.

Bloomberg reported that financial regulators are currently discussing the issue and no implementation schedule has been confirmed.

The SFC’s action contrasts with the policy adopted by the U.S. Securities and Exchange Commission (SEC). The SEC considers staking services to be investment contracts and violate securities laws.

This is evident from recent revisions by major financial institutions applying for spot ETH ETFs. For example, Fidelity removed staking from their latest S1 submission.

Cryptocurrency staking as a service allows proof-of-retention token holders to lock up their cryptocurrency tokens for a set period of time. In return for staking cryptocurrencies, traders earn a percentage of the staked tokens as rewards. There are numerous third-party staking services that allow users to stake their tokens.

Related: As the spot Ether ETF decision date approaches, cryptocurrency insiders are anxious and divided.

Last year, the US SEC deemed staking services a security, forcing companies like Kraken exchange to discontinue staking services in the US.

Coinbase, on the other hand, is fighting the SEC’s security for staking, issuing a “Petition for Rulemaking” on March 20, arguing that core staking is a security because it does not involve the investment of money and the opportunity cost of staking. I explain no. It’s not an investment.

Hong Kong has emerged as a growth hub for cryptocurrency service providers in 2024 due to several cryptocurrency-related regulations.

It became the first country to approve a spot ETH ETF before the United States. However, since its launch last month, the response has been lukewarm. The decision to allow staking could bring new investment flows to the country’s ETFs.

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