Hong Kong SFC considers allowing Ether staking for ETF issuers

Hong Kong’s Securities and Futures Commission (SFC) is reportedly considering including an Ether (ETH) staking option for the spot ETH exchange-traded fund (ETF) issuers.

According to a report published in Bloomberg, the financial regulator in Hong Kong is mulling whether ETH ETF issuers in the country should be allowed to stake Ether ETHUSD and make passive income. Hong Kong approved a Bitcoin BTCUSD ETF earlier this year, more than three months after the United States approved 10 spot ETFs.

The SFC reportedly held discussions with the country’s crypto ETF issuers about providing staking services via licensed platforms after fielding proposals in recent weeks.

The financial regulator is currently only discussing the matter, and there is no fixed timeline for implementation, reported Bloomberg.

The move by the SFC is in contrast to the policy adopted by the U.S. Securities and Exchange Commission (SEC), which sees staking services as an investment contract and a violation of securities laws.

This was evident from the recent amendments made by major financial institutions applying for the spot ETH ETF. For example, Fidelity removed staking from its latest S1 filing.

Crypto staking as a service allows proof-of-reserve tokenholders to lock their crypto tokens for a set period of time. In return for staking crypto, traders earn a percentage of staked tokens in return as a reward. There are numerous third-party staking services that allow users to stake their tokens.

Last year, the U.S. SEC deemed staking services as a security, forcing the likes of Kraken to shut its staking services in the United States.

 Coinbase, on the other hand, is fighting the SEC’s security stance on staking and, on March 20, published a “Petition for Rulemaking,” explaining that core staking is not a security, as it does not involve an investment of money, and the opportunity cost of staking is not an investment.

Hong Kong has emerged as a growing hub for crypto service providers in 2024, owing to several pro-crypto regulations.

It also became the first country to approve a spot ETH ETF ahead of the United States. However, the response has been lukewarm following its launch last month. This decision to allow staking could bring a new stream of investment into the country’s ETFs.

Magazine: What do crypto market makers actually do? Liquidity, or manipulation