TLDR
- Hong Kong’s SFC has approved staking services, enabling ChinaAMC to launch an Ethereum ETF with staking by May 15
- This follows Bosera and HashKey’s similar ETF launch scheduled for April 25
- OSL Digital Securities will provide custody services with Kiln managing validator nodes
- Staking rewards will be incorporated into the ETF’s net asset value
- Hong Kong is positioning itself as a leading digital assets hub in Asia with new regulatory frameworks
Hong Kong is taking steps to position itself as Asia’s premier digital assets hub with its latest approval of an Ethereum staking ETF. The Securities and Futures Commission (SFC) has granted China Asset Management (ChinaAMC) permission to launch a staking-enabled Ethereum ETF in collaboration with OSL Digital Securities by May 15.
This approval comes just weeks after the SFC published guidance permitting licensed virtual asset trading platforms to offer staking services. The regulatory shift is part of Hong Kong’s wider strategy to create a thriving digital asset ecosystem.
ChinaAMC’s offering will transform their Ether ETF from a passive investment product into an active participant in the Ethereum ecosystem. This evolution allows investors to receive proof-of-stake rewards through a familiar investment vehicle.
How the Staking ETF Works
The technical implementation of the ETF maintains clear separation of duties between key players. OSL Digital Securities, the first insured and SFC-licensed digital asset platform in Hong Kong, will provide custody services with cold storage and insurance coverage.
Kiln, a staking platform that powers other blockchain networks including Solana, Aptos, and Sui, will manage the validator nodes. These nodes perform consensus duties on the Ethereum network while OSL controls the assets and handles reward distribution.
This partnership was finalized on April 10 with the specific goal of bringing Ethereum staking to market. According to Thomas Zhu, head of digital assets at ChinaAMC, this approach “lowers the threshold to participating in Ethereum staking.”
All staking rewards generated through this system will accrue to the ETF. These rewards will be incorporated into its net asset value, directly benefiting shareholders.
The Broader Regulatory Landscape
This isn’t the first such approval in Hong Kong. Earlier this month, Bosera International and HashKey Capital Limited jointly launched their own fund with a staking provision, expected to go live on April 25.
These approvals align with Hong Kong’s comprehensive roadmap for virtual assets. The SFC has introduced a five-pillar framework called “ASPIRe” targeting key aspects of the digital asset ecosystem.
This framework focuses on Access, Safeguards, Products, Infrastructure, and Relationships. It includes 12 strategic initiatives crafted to foster growth in the sector.
The benefits of staking through an ETF are numerous for investors. They include passive income generation, potentially compounded returns, greater liquidity compared to directly staked assets, and simplified tax reporting.
For investors unfamiliar with crypto staking, these ETFs offer institutional-grade security. The ETF provider handles the technical aspects, removing barriers to entry that might otherwise deter traditional investors.
While returns may be somewhat lower than direct staking due to ETF fees, the trade-off comes with greater convenience and reduced technical knowledge requirements. Investors can access these products through standard brokerage accounts.
Hong Kong’s forward-thinking approach may influence other jurisdictions. The success of Ethereum ETF staking could pave the way for similar services for other proof-of-stake cryptocurrencies.
The city’s proactive stance is likely to spur further innovation in the region. More ETF providers may seek to incorporate staking into their products to remain competitive and attract investors.
This development is about more than just staking. It represents Hong Kong’s commitment to building a mature and accessible crypto investment landscape while maintaining appropriate regulatory oversight.
For the Ethereum ecosystem, increased participation in staking strengthens network security and efficiency. As more ETF products incorporate staking, it could lead to an increase in staked ETH, further decentralizing the network.
The Hong Kong SFC has sent a clear message: they are open for crypto business and committed to fostering responsible innovation in digital assets.
