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Hong Kong SFC mulls allowing staking for Ethereum ETFs

Hong Kong's SFC considers staking for Ethereum ETFs to boost investor interest amid low trading volumes.

Ethereum over a Hong Kong Skyline

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Hong Kong’s Securities and Futures Commission (SFC) is reportedly exploring the possibility of allowing Ethereum ETFs under its jurisdiction to stake their tokens, a move that sets it apart from the stance taken by US regulators.

This initiative aligns with the SFC’s progressive approach, following its recent approval of spot Ethereum ETFs alongside Bitcoin products. According to the report, the talks are still ongoing and no clear timeline for a decision has been provided.

Staking on Ethereum enables participants to lock up their Ether (ETH) hold to support network security and operations in exchange for rewards. The process involves depositing a minimum of 32 ETH to activate validator software, which allows users to participate directly in Ethereum’s consensus by validating transactions, creating new blocks, and monitoring for malicious activity. Other types of staking allow participants with less than 32 ETH to pool funds (staking pools), while some platforms also provide staking as a service.

The introduction of staking could potentially attract more investors to Hong Kong’s Ethereum ETFs, which have struggled with low trading volumes since their launch. Aggregated data indicates that the total ETH in these funds was 13,380, while the total BTC was 3,690.

In contrast, the US Securities and Exchange Commission (SEC) has argued that staking could fall under federal securities law, taking legal action against major crypto firms like Kraken and Coinbase over their staking products. This stance has been met with strong opposition from crypto stakeholders.

Given the regulatory uncertainty in the US, several Ethereum ETF applicants, including Fidelity, BlackRock, Grayscale, Bitwise, VanEck, Franklin Templeton, Invesco Galaxy, and ARK 21Shares, have excluded staking from their fund plans. Some market participants argue that this decision might make these funds less attractive to investors.

The SEC is expected to announce its decision on the pending Ethereum ETF applications Thursday, May 23. Market sentiment has turned positive this week, with Bloomberg analyst Eric Balchunas raising the odds of approval to 75%, citing increasing political pressure on the financial regulator. Similarly, the chances of approval have spiked to 65% from a low of 10% on Polymarket.

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