Unlike the United States, Hong Kong is considering spot Ethereum ETF staking.

Hong Kong is reportedly considering including an Ethereum staking option for issuers of Ethereum spot exchange-traded funds (ETFs).

Local Ethereum (ETH) ETF investors will be able to generate passive income by staking their tokens on the Ethereum network to verify transactions, if the Hong Kong Securities and Futures Commission (SFC) allows staking.

Staking is a process where token holders lock up their cryptocurrency tokens for a specific period of time and receive rewards based on the percentage of tokens staked. This process is facilitated by a variety of third-party staking services that cater to user needs. Essentially, staking is a way to earn rewards (extra money) while holding a specific cryptocurrency.

Hong Kong’s move contrasts with the perception of the U.S. Securities and Exchange Commission (SEC), which views staking as an investment contract and a violation of securities laws. The global adoption of spot ETF staking could spark ongoing debate about the practice in the United States.

The Role of Staking in the United States

Coinbase has defended staking in the United States and has fought the SEC over the legality of the practice. Coinbase believes that core staking is not a security because it does not involve an investment of money and the opportunity cost of staking is not an investment.

Because users’ rewards are compensation for services provided, Coinbase believes that staking does not meet “expectations of profit” and consists of ministerial maintenance rather than a traditional investment effort.

Last February, crypto.news reported that 55% of Singapore cryptocurrency investors had staked their cryptocurrencies through centralized exchanges, indicating strong optimism about staking. Staking is also popular in other global cryptocurrency hotspots.

On Wednesday, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21), sending a message to the cryptocurrency industry that America welcomes cryptocurrencies. Additionally, the SEC approved a spot Ethereum ETF, pushing the price of Ethereum (ETH) above $3,900 at the time of this writing.

However, due to the SEC’s stance on staking, many US-based companies such as Fidelity Investments are not planning to invest stakes in the upcoming Ethereum ETF.