Hong Kong’s Securities and Futures Commission (SFC) is reportedly exploring the possibility of introducing an Ether (ETH) staking feature for issuers of spot ETH exchange-traded funds (ETFs).
A Bloomberg report states that the financial regulator in Hong Kong is considering whether ETH ETF issuers in the country should be permitted to stake Ether and generate passive income. Earlier this year, Hong Kong approved a Bitcoin (BTC) ETF, more than three months after the United States gave the green light to 10 spot ETFs.
The SFC has reportedly engaged in discussions with crypto ETF issuers in the country regarding the provision of staking services through licensed platforms, following proposals received in recent weeks.
It is important to note that the financial regulator is currently only in the discussion phase and no specific timeline for implementation has been set, according to Bloomberg.
This move by the SFC stands in contrast to the stance taken by the U.S. Securities and Exchange Commission (SEC), which considers staking services to be an investment contract and a violation of securities laws.
This viewpoint was made evident by recent amendments made by major financial institutions applying for spot ETH ETFs. For example, Fidelity removed staking from its latest S1 filing.
Crypto staking as a service allows tokenholders to lock their crypto tokens for a specific period of time. In exchange for staking their tokens, traders receive a percentage of the staked tokens as a reward. There are various third-party staking services available for users to stake their tokens.
Last year, the U.S. SEC classified staking services as securities, resulting in platforms like Kraken discontinuing their staking services in the United States.
On the other hand, Coinbase is challenging the SEC’s classification of staking as a security. On March 20, the company published a “Petition for Rulemaking,” asserting that core staking should not be considered an investment contract as it does not involve the 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 due to its favorable crypto regulations. It became the first country to approve a spot ETH ETF ahead of the United States. However, the response to its launch last month has been relatively tepid. Allowing staking could potentially attract a new wave of investment into the country’s ETFs.