Hong Kong has taken a significant step forward in the compliance of virtual asset financial products. The Securities and Futures Commission (SFC) officially issued a circular on April 7, 2025, explicitly allowing virtual asset spot ETFs to participate in on-chain staking activities under a prudent regulatory framework. Simultaneously, restrictions on virtual asset trading platforms have been relaxed, permitting licensed platforms to offer staking services to clients. This move represents another substantial advancement in Hong Kong’s exploration of a compliant Web3 financial system, following the approval of virtual asset ETFs for listing and trading in 2024.
Integrating Staking into Traditional Finance: A Compliant On-Chain Revenue Path
Staking has become one of the most critical on-chain economic activities in the virtual asset ecosystem, particularly for public chains utilizing the Proof-of-Stake (PoS) consensus mechanism. It not only maintains network security and operation but also serves as a primary channel for institutions and users to generate on-chain returns. According to industry data, over 34 million ETH has been staked in the Ethereum network as of early April 2025, accounting for 28.03% of its total supply. Projects like Cardano and Solana have maintained staking rates above 70% for extended periods, demonstrating strong market consensus for staking as a widely accepted on-chain revenue mechanism.
Under the new circular, Hong Kong’s virtual asset spot ETFs can participate in on-chain staking within a carefully safeguarded framework to obtain native yields associated with blockchain networks like Ethereum. This decision signals two key developments: first, Hong Kong recognizes staking as a core mechanism for obtaining network incentives within public chain ecosystems, underpinned by sound economic logic; second, regulatory authorities are increasingly sophisticated in their understanding of virtual asset and Web3 technologies and their ability to manage associated risks.
To ensure risk control, the circular mandates that spot ETFs must engage in staking through licensed trading platforms and authorized institutions, with caps on staking ratios to manage liquidity risks and ensure asset independence and security. Additionally, ETF managers must comprehensively disclose key information, including staking operational mechanisms, yield calculation models, potential risks, and staking ratio limits, to protect investors’ right to information and asset rights.
Notably, as guidelines issued in June 2023 previously prohibited licensed trading platforms from "making any arrangements with clients to generate returns for clients or any other parties using client virtual assets held by the platform or other connected entities," the SFC also released a concurrent circular revising these restrictions. This update explicitly allows trading platforms to offer staking services to clients. The circular does not restrict the types of virtual assets eligible for staking, meaning that platforms may compliantly offer staking services for projects like Cardano and Solana in addition to Ethereum. These changes not only expand the service boundaries of trading platforms, enabling them to offer value-added services beyond mere transaction matching but also provide a trustworthy compliance execution environment for spot ETFs participating in staking.
For virtual asset spot ETFs, staking represents a "reutilization" of underlying assets, creating additional yields without affecting the ETF’s share structure. This provides a compliant "on-chain revenue channel" for more users and institutions. The introduction of staking mechanisms will significantly enhance the appeal and scale of virtual asset spot ETF products. While traditional ETFs rely on asset price fluctuations or dividends, the integration of staking transforms virtual asset spot ETFs from passive trackers of price movements into active yield-generating "on-chain equity instruments." The additional annualized yield of 3%–6% from staking will be a critical factor in attracting institutional investors, family offices, and other medium- to long-term capital. Over the next 6 to 12 months, as staking mechanisms are gradually implemented, the managed scale of Hong Kong’s virtual asset spot ETFs is expected to achieve structural growth.
Moreover, the revenue-sharing mechanism for staking yields will broaden the income structures of fund managers and custodians, incentivizing more market participants to design innovative product frameworks under compliance guidelines. This will further enhance the differentiation and competitiveness of Hong Kong’s virtual asset-related products. Given the high requirements for asset security and technical stability in staking operations, the potential demand for compliant staking will also pressure Hong Kong to accelerate the development of virtual asset infrastructure, fostering a more mature and comprehensive Web3 ecosystem.
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Building a Bridge Between Traditional Finance and On-Chain Economy
Hong Kong’s approval of staking services reflects not merely a regulatory relaxation but also deeper considerations in institutional design: promoting the virtual asset market toward a more mature and internationalized stage of development while ensuring investor rights and risk controllability.
The primary motivation lies in strengthening and optimizing the operational mechanisms of the local ETF market. Since Hong Kong approved the first batch of virtual asset spot ETFs for listing and trading in 2024, market response has been rational, and product mechanisms robust. However, overall trading activity and asset management scale have yet to meet market expectations. The lack of an endogenous yield mechanism has made these products relatively单一 compared to traditional yield-generating funds. The introduction of staking not only provides an additional revenue source but also fosters tighter linkage between ETFs and blockchain ecosystems, potentially attracting a broader investor base, particularly institutional investors focused on balancing "yield and asset allocation."
At a deeper level, opening ETF staking is a crucial step in building Hong Kong’s Web3 financial ecosystem闭环. Since establishing the Virtual Asset Service Provider (VASP) licensing mechanism and allowing retail investors to participate in trading, Hong Kong’s virtual asset compliance framework has gradually taken shape. However, achieving a truly deep and resilient Web3 ecosystem requires同步 advancements in on-chain operational capabilities, revenue models, and compliance safeguards. The introduction of on-chain staking mechanisms represents the first attempt to incorporate native DeFi functions into traditional finance, establishing an institutionalized and sustainable revenue linkage bridge between on-chain finance and traditional capital markets.
Furthermore, in the context of global regulatory competition, Hong Kong’s policy implementation sets a forward-looking example. The United States has not yet approved any staking-enabled ETFs, with primary controversies centered on asset ownership, potential security attributes, and risk control. Hong Kong, through measures such as custodial isolation, ratio caps, and risk disclosure, has explored a feasible prudential regulatory model, providing a valuable reference for other jurisdictions.
In the future, whether the U.S. approves Ethereum ETF staking functionality may again significantly influence global virtual asset product design. As institutions like Coinbase and Grayscale continue to promote policy communication, the SEC’s stance on staking mechanisms may experience marginal relaxation. According to recent disclosures by foreign media, pilot applications for certain staking functions have entered the final evaluation stage. If the U.S. ultimately approves, it will reignite global market interest in "staking-enabled ETF" related products and create competitive pressure on Hong Kong’s existing product structures. However, until then, Hong Kong’s policy implementation speed and regulatory clarity are expected to attract more international capital focused on "on-chain yields" to the Asia-Pacific market, further consolidating its leading advantage in the global virtual asset and digital financial innovation landscape.
It is foreseeable that as more ETF managers submit staking plans and more trading platforms launch compliant staking services, Hong Kong will build a virtual asset financial product system with richer yields, more rational structures, and more complete institutions. This will propel virtual assets from being "tradable" to a new stage of being "configurable" and "appreciable," meeting investors’ diverse needs and supporting the sustainable development of Hong Kong’s virtual asset ecosystem.
Frequently Asked Questions
What is virtual asset staking?
Virtual asset staking involves participating in blockchain network operations by locking up cryptocurrencies to support network security and consensus. In return, participants receive rewards, typically in the form of additional tokens, generating a yield on their holdings.
How does staking benefit ETF investors?
Staking allows ETF investors to earn additional yields on underlying assets without altering the ETF’s structure. This transforms the ETF from a passive investment tracking asset prices into an active yield-generating instrument, enhancing overall returns.
Are there risks associated with staking in ETFs?
Yes, risks include slashing (penalties for network violations), liquidity constraints due to lock-up periods, and technical failures. However, Hong Kong’s regulatory framework mandates risk disclosures, custodial safeguards, and staking ratio caps to mitigate these risks.
Which virtual assets are eligible for staking in Hong Kong?
The circular does not restrict eligible virtual assets, meaning staking services may extend beyond Ethereum to include other PoS-based assets like Cardano and Solana, subject to platform and regulatory approvals.
How does Hong Kong’s approach compare to the U.S.?
Hong Kong has proactively approved staking for ETFs under a prudent framework, while the U.S. remains cautious due to regulatory concerns. Hong Kong’s model emphasizes transparency, risk controls, and investor protection, setting a benchmark for other regions.
Will staking increase the attractiveness of Hong Kong’s virtual asset market?
Absolutely. By offering compliant yield-generating mechanisms, Hong Kong enhances its appeal to institutional and long-term investors, positioning itself as a leader in integrating traditional finance with on-chain economies.