Hong Kong is considering allowing exchange-traded funds (ETFs) to invest directly in ether. Hong Kong's Securities and Futures Commission (SFC) is engaging the city's cryptocurrency ETF issuers on offering staking services through licensed platforms, the Business Times reported.
Passive encoder input
This potential regulatory change could open up a new source of passive income for investors, putting Hong Kong ahead of the United States, where such supply is restricted. Stake offers investors a way to earn passive income by locking tokens on the Ethereum network to help validate transactions, currently generating about 4% per year in additional coins.
If the SEC approves the staking proceeds, it could significantly boost the appeal of spot cryptocurrency ETFs in Hong Kong, which have seen moderate demand since their launch in April. The move could give Hong Kong a competitive advantage over the United States, which recently approved applications for Ethereum ETFs by Nasdaq, the Chicago Mercantile Exchange and the New York Stock Exchange.
Hong Kong is actively positioning itself as a hub for digital assets, competing with cities like Singapore and Dubai. This follows the implementation of a dedicated regulatory regime last year aimed at renewing the city's status as a financial center after a period of political turmoil.
In addition to ETFs, Hong Kong is reviewing several applications to increase the number of licensed digital asset exchanges. In addition, it is developing a framework for stablecoins, which are typically tied to fiat currencies and backed by cash and bond reserves.
In a significant development, the US Securities and Exchange Commission approved applications from major exchanges such as Nasdaq, CBOE and NYSE to list ETFs linked to the price of ether yesterday (Thursday). This achievement will likely pave the way for the launch of these funds later in the year, pending regulatory procedures and investor disclosures.
US grants partial approval for Ethereum ETFs
As the SEC's deadline approaches to decide the fate of several applications for ether ETFs, major asset managers, including BlackRock, Grayscale, and Bitwise, have made significant adjustments to their applications. These amendments necessitated the removal of stacking provisions.
While staking provides a way to generate passive income, US regulators view it as constituting an offering of unregistered securities. Hence, companies like BlackRock have explicitly stated in their amended filings that they will not engage in actions related to staking or generating additional returns using the ether held by their ETFs.
This article was written by Jared Kirroy at www.financemagnates.com.