Ethereum
Unlike the US, Hong Kong plans to invest in Ethereum spot ETFs
Hong Kong is reportedly considering including an Ethereum staking option for issuers of Ethereum spot exchange-traded funds (ETFs).
If Hong Kong’s Securities and Futures Commission (SFC) allows staking, investors in local Ethereum (ETH) ETFs could generate passive income by staking tokens on the Ethereum network to validate transactions.
Staking is a process where token holders lock up their crypto tokens for a specific period, earning rewards as a percentage of the tokens staked as reward. This process is facilitated by various third-party staking services that cater to user needs. Essentially, staking is a way to earn rewards – extra money – while holding specific cryptocurrencies.
Hong Kong’s move contrasts with the U.S. Security and Exchange Commission’s (SEC) perception of staking as an investment contract and a violation of securities laws. A global adaptation of ETF spot staking could spark ongoing discussions about the practice in the United States.
The role of staking in the United States
Coinbase advocates staking in the United States and has been fight against the SEC on the legality of the practice. Coinbase believes that core staking is not a security because it does not involve an investment of money, and the opportunity cost of staking is not an investment.
Because user rewards are compensation for services provided, Coinbase believes that staking does not meet an “expectation of profit” and consists of the ministerial interview rather than conventional investment efforts.
In February, crypto.news reported that 55% of crypto investors in Singapore had staked on crypto through a centralized exchange, signaling strong optimism towards staking. Staking is popular in other global crypto hotspots.
On Wednesday, the US House of Representatives pass the Financial Innovation and Technology for the 21st Century Act (FIT21), essentially communicating with the crypto industry that the United States is welcome in crypto. Additionally, the SEC approved Ethereum spot ETFs, which pushed the price of Ethereum (ETH) to over $3,900 at the time of writing.
However, due to the SEC’s stance on staking, many US-based companies, like Fidelity Investments, have no plans to participate in their upcoming Ethereum ETFs.