Staking involves participants locking up digital assets to support network security and operations, earning rewards in return. Its introduction into the ETFs would explore the income-generating potential of staking within the framework of a regulated financial product.

Market observers note that this initiative aligns with the SFC’s progressive approach following its recent approval of spot Ethereum ETFs alongside Bitcoin products.

Moreover, the staking feature could potentially attract more investors to Hong Kong’s Ethereum ETFs, which have struggled with low trading volumes since their launch. According to SosoValue, as of May 22, the total ETH in these funds was 13,380, while the total BTC was 3,690.

Staking in the US

While Hong Kong regulators are contemplating a more favorable stance toward staking, the US Securities and Exchange Commission (SEC) has argued that the mechanism could fall under federal securities law.

Over the past year, the SEC has taken legal action against major crypto firms like Kraken and Coinbase, claiming their staking products violate federal securities laws. However, crypto stakeholders have strongly opposed this classification.

Against this backdrop and regulatory uncertainty, several Ethereum ETF applicants, including Fidelity, BlackRock, Grayscale, Bitwise, VanEck, Franklin Templeton, Invesco Galaxy, and ARK 21Shares, have excluded staking from their fund plans.

This development has prompted some market participants to argue that these funds might be less attractive to investors without staking.

The SEC is expected to reveal its decision about the pending Ethereum ETF applications today, May 23. This week, the market consensus turned positive after Bloomberg analyst Eric Balchunas raised the odds of approval to 75%, citing the increasing political pressure surrounding the financial regulator.

Notably, the chances of approval have also spiked to 65% from a low of 10% on Polymarket.

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