3 months ago
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Hong Kong’s move towards staking for spot Ethereum ETFs could be a game-changer, giving them a competitive edge over US ETFs and solidifying Hong Kong as a leading digital asset hub.
Hong Kong’s crypto asset management firms are actively incorporating staking into their spot Ethereum exchange-traded funds (ETFs). If approved, this innovation could make Hong Kong’s ETFs more competitive globally than their US counterparts.
Yat Siu, Chairman of Animoca Brands, mentioned in an interview with The Block that Hong Kong is actively considering ETH staking for ETFs. He expressed optimism about the possibility of this happening within the year, citing the slow progress in the US and the upcoming election as factors influencing the timeline.
HashKey, a leading digital asset firm in Hong Kong, is developing a compliant staking solution for ETFs. Livio Weng, CEO of HashKey Exchange, explained that they have created a plan to earn rewards without increasing risks. While the details are still confidential, Weng emphasized their focus on a controlled and compliant approach.
Blockdaemon’s Staking Push
The enthusiasm extends beyond individual firms. Blockdaemon, a blockchain infrastructure provider, is working with Hong Kong ETF issuers and custodians to search for staking possibilities. Glenn Woo, APAC head of sales at Blockdaemon, is optimistic based on his industry discussions. “We all kind of have the positive outlook in terms of getting that [ether staking] approved as well,” Woo said.
This collective effort aims to secure staking approval by year-end. Woo explained:
“That’s the biggest missing piece and it looks like there’s a consensus that this is what’s missing.”
Blockdaemon’s experience with European ETFs strengthens their confidence for similar success in Hong Kong.
Hong Kong’s spot crypto ETFs have performed modestly compared to their US counterparts. The total daily trading volume for the three spot Bitcoin ETFs in Hong Kong is much lower than in the US. Siu of Animoca acknowledges this gap but believes staking can change the game. “Hong Kong should be able to be bigger…It must be competitive,” he emphasized.
The US SEC’s reluctance to allow staking for ETFs presents a significant opportunity for Hong Kong. Staking rewards could incentivize investors and give Hong Kong ETFs a clear edge. Siu views this as a crucial first step:
“I think staking could be the big, big differentiator for Hong Kong.”
3-4% Staking Yields Missed in US ETFs
Woo of Blockdaemon echoes Siu’s sentiment regarding investor interest. He noted that the absence of a staking feature is deterring many potential Ethereum ETF buyers. The potential loss of staking yields, estimated at 3-4%, significantly deters investors.
Hong Kong’s government and regulators seem aware of this gap. Woo emphasizes that there is a push from the Hong Kong government and regulators to expedite processes. Effective communication between ETF issuers and regulators about education and staking strategies will be crucial for securing approval.
Hong Kong’s move towards staking for spot Ethereum ETFs shows a proactive approach to establishing a competitive edge in the global crypto market. If successful, this innovation could attract significant investor interest and strengthen Hong Kong’s position as a leading digital asset hub.
