Hong Kong is considering the integration of staking rewards into its spot Ethereum exchange-traded funds (ETFs), according to Yat Siu, the Chairman of Animoca Brands. Siu anticipates that approval for this initiative might be granted by the year’s end. He noted that discussions regarding Ethereum staking are progressing and expects Hong Kong to greenlight staking before the United States. This development is seen as a pivotal move in the region’s financial landscape.
Preparations for Ethereum Staking
Asset managers in Hong Kong are diligently working to incorporate staking features into spot Ethereum ETFs. HashKey, co-managing Bitcoin and Ethereum ETFs with Bosera, is drafting a proposal for this purpose. HashKey Exchange CEO Livio Weng explained that their objective is to secure rewards while managing risks effectively. Although specifics are still under deliberation, the aim is to advance smoothly and methodically.
Blockchain infrastructure provider Blockdaemon is also in discussions with Hong Kong ETF issuers and custodians to implement staking services. Glenn Woo, Blockdaemon’s APAC Sales Manager, expressed confidence that staking approval is forthcoming. Woo highlighted a consensus among industry players that staking is the missing element in current ETF offerings, and its authorization is anticipated soon.
Comparing Crypto ETF Markets
Hong Kong’s spot crypto ETFs have underperformed compared to those in the US. Despite initial excitement, trading volumes for Hong Kong’s spot Bitcoin ETFs are notably lower. For example, last Thursday, the total daily trading volume for three Hong Kong spot Bitcoin ETFs was just $6.08 million, whereas the US saw $1.42 billion in trading volume for 11 spot Bitcoin ETFs on the same day. This gap signifies the need for Hong Kong to enhance its ETF market’s competitiveness.
The inclusion of staking rewards could provide a significant edge for Hong Kong’s spot Ethereum ETFs. The US Securities and Exchange Commission has made it clear that it will not permit staking features anytime soon. This restriction presents Hong Kong with an opportunity to attract more investors by offering benefits that are unavailable in the US market. Siu underscored that competitive pricing and innovative features like staking are essential for drawing both Eastern and Western investors.
Takeaways for Investors
Key inferences for potential Ethereum ETF investors:
- Staking rewards can range from 3% to 4%, representing a notable opportunity cost if missed.
- The potential approval of staking in Hong Kong could offer unique advantages over US-based ETFs.
- Investors may find Hong Kong’s ETFs more appealing due to the added benefit of staking rewards.
Woo emphasized the significance of staking for Ethereum ETF investors, pointing out that missing out on 3% to 4% staking rewards is considerable in terms of opportunity cost.
Hong Kong’s government and regulatory bodies recognize this gap and are motivated to expedite the approval process. Effectively communicating the strategy and benefits of staking to regulatory authorities is crucial for advancing this initiative.
