Hong Kong Contemplating Investment in Ethereum ETFs, Diverging from the US Approach
Hong Kong is reportedly contemplating the inclusion of an Ethereum staking option for issuers of spot Ethereum exchange-traded funds (ETFs). If approved by the Securities and Futures Commission (SFC), investors in local Ethereum (ETH) ETFs could earn passive income by staking tokens on the Ethereum network to validate transactions.
Staking is a process where token holders lock their crypto tokens for a specific period and earn rewards as a percentage of the staked tokens. Various third-party staking services facilitate this process to meet user requirements. Essentially, staking allows users to earn extra money while holding specific cryptocurrencies.
This move by Hong Kong differs from the United States Securities and Exchange Commission’s (SEC) view on staking, which considers it an investment contract and a violation of securities laws. The potential global adoption of spot ETF staking could spark discussions about the practice in the United States.
In the United States, Coinbase has been advocating for staking and has been engaged in a legal battle with the SEC regarding its legality. Coinbase argues that staking is not a security because it doesn’t involve an investment of money, and the opportunity cost of staking is not an investment. According to Coinbase, staking rewards are compensation for services rendered, and staking is more akin to ministerial maintenance than traditional investing efforts.
In February, it was reported that 55% of crypto investors in Singapore had staked crypto through centralized exchanges, indicating a strong optimism towards staking. Staking is also popular in other global crypto hubs.
Recently, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21), signaling a welcoming stance towards the crypto industry. Additionally, the SEC approved spot Ethereum ETFs, leading to a surge in the price of Ethereum (ETH) to over $3900 at the time of writing.
However, due to the SEC’s position on staking, many US-based companies, including Fidelity Investments, have not made plans to incorporate staking in their upcoming Ethereum ETFs.
