Hong Kong’s Securities and Futures Commission (SFC) is considering a groundbreaking move to allow Ether (ETH) staking for spot ETH exchange-traded fund (ETF) issuers. This potential shift could offer significant passive income opportunities for investors and position Hong Kong as a leading hub for crypto services.
According to Bloomberg, the SFC is discussing whether ETH ETF issuers should be permitted to stake Ether. This would enable them to earn passive income through staking services provided by licensed platforms. The discussions come after Hong Kong approved its first Bitcoin ETF earlier this year, trailing the United States, which has approved ten spot ETFs.
In recent weeks, the SFC has been engaging with the country’s crypto ETF issuers, exploring the feasibility of integrating staking services. However, these talks are still in the preliminary stages, with no set timeline for implementation.
This move contrasts sharply with the stance of the U.S. Securities and Exchange Commission (SEC), which classifies staking services as investment contracts, thus falling under securities laws. Major financial institutions, such as Fidelity, have already amended their filings to exclude staking from their spot ETH ETF applications in response to the SEC’s position.
Crypto staking allows holders of proof-of-reserve tokens to lock their assets for a specified period, earning a percentage of the staked tokens as rewards. Several third-party services facilitate this process, making it accessible to a broader audience.
Last year, the U.S. SEC’s classification of staking services as securities led to the shutdown of such services by firms like Kraken. In contrast, Coinbase is challenging the SEC’s stance, arguing that core staking does not constitute a security.
Hong Kong’s progressive approach has made it an attractive destination for crypto service providers in 2024. The region recently became the first to approve a spot ETH ETF, although initial investor response has been lukewarm. Allowing staking could potentially revitalize interest and attract new investments into the country’s ETF market.