Hong Kong has taken another important step in promoting the compliance of virtual asset financial products. On April 7, the Hong Kong Securities and Futures Commission (SFC) officially issued a circular, 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 were relaxed, permitting licensed platforms to provide staking services to clients. Following the approval of virtual asset ETFs in 2024, this is another substantial key step in exploring a compliant Web3 financial system, which not only helps enhance the attractiveness of Hong Kong's virtual asset ecosystem but also provides a globally significant template by combining traditional financial products with native mechanisms of on-chain economics for the first time.
1. Introducing Staking into Traditional Financial Systems, Creating a Compliant On-Chain Yield Pathway
Staking mechanisms have become one of the most important on-chain economic activities in the virtual asset ecosystem, especially for public chains using Proof of Stake (PoS) consensus mechanisms. It not only maintains network security and normal operations but has also become the primary channel for institutions and users to obtain on-chain yields. According to incomplete statistics from OKG Research, by early April 2025, over 34 million ETH had been staked on the Ethereum network, accounting for 28.03% of its total supply; Cardano and Solana projects have also maintained staking rates above 70%, demonstrating that staking has established a strong market consensus as a widely accepted on-chain yield mechanism.
According to the latest circular, Hong Kong's virtual asset spot ETFs can participate in on-chain staking of their held virtual assets within a prudently guaranteed framework to obtain native yields related to blockchain networks like Ethereum. This move signals at least two points: first, Hong Kong recognizes staking as a core mechanism for obtaining network incentives in public chain ecosystems with reasonable economic logic; second, regulatory authorities' technical understanding and risk control capabilities for virtual assets and Web3 ecosystems are increasingly mature.
To ensure risk controllability, the circular stipulates that spot ETFs must conduct and custody staking assets through licensed trading platforms and authorized institutions, setting a staking percentage cap to manage liquidity risks and ensure asset independence and security. Additionally, ETF managers must fully disclose staking operational mechanisms, yield calculation models, potential risks, and staking percentage caps to safeguard investors' right to information and asset interests.
Notably, the Virtual Asset Trading Platform Guidelines issued in June 2023 previously prohibited licensed platforms from arranging any use of client virtual assets to generate returns. Therefore, the Hong Kong SFC simultaneously issued a circular regarding virtual asset trading platforms providing staking services, modifying previous restrictions and explicitly allowing platforms to offer staking services to clients. The circular did not limit the types of virtual assets for staking, meaning platforms may also compliantly launch staking services for public chain projects like Cardano and Solana beyond ETH. These changes will not only expand trading platforms' service boundaries, enabling licensed platforms to provide value-added services to enhance user stickiness and trading volume, but more importantly, create a trustworthy compliant execution environment for spot ETF staking.
For virtual asset spot ETFs, staking essentially represents "re-utilization" of underlying assets, creating additional yields without affecting ETF share structures and providing compliant "on-chain yield channels" for more users and institutions. The introduction of staking mechanisms will significantly enhance virtual asset spot ETF products' attractiveness and scale. Traditional ETF yields depend on asset price fluctuations or dividends, but staking will transform virtual asset spot ETFs from passive price trackers to "on-chain equity certificates" with active yield functions. Additional annual yields of 3%-6% from staking will become a crucial factor attracting institutional investors and family offices with medium to long-term capital. Within the next 6-12 months, as staking mechanisms are gradually implemented, Hong Kong's virtual asset spot ETF management scale is expected to achieve structural growth.
Simultaneously, the staking yield sharing mechanism will expand fund managers' and custodian institutions' revenue structures, incentivizing more market participants to design innovative product structures within a compliant framework, further enhancing Hong Kong's virtual asset product differentiation and competitiveness. Moreover, as staking operations require high asset security and technical stability, potential compliant staking demand will drive Hong Kong to accelerate virtual asset infrastructure construction and promote a more mature and comprehensive Web3 ecosystem.
2. Building a Yield Linkage Bridge between Traditional Finance and On-Chain Economics
Hong Kong's permission for staking services is not merely a regulatory relaxation but reflects deeper institutional design considerations: promoting Hong Kong's virtual asset market towards a more mature and internationalized development stage while ensuring investor rights and controllable risks.
The primary motivation is strengthening and optimizing local ETF market operating mechanisms. Since approving the first batch of virtual asset spot ETFs in 2024, although market response has been rational and product mechanisms stable, overall trading activity and asset management scale have not met market expectations. The lack of intrinsic yield mechanisms makes these products appear relatively single compared to traditional income-generating funds. The introduction of staking mechanisms not only brings additional revenue sources but also provides closer linkage between ETFs and blockchain ecosystems, potentially attracting broader investor groups, especially institutional investors focusing on "yield + asset allocation" balance.
Looking deeper, opening ETF staking is also a crucial step in Hong Kong's construction of a Web3 financial ecosystem closed loop. Since establishing the VASP licensing mechanism and allowing retail investors to trade, Hong Kong's virtual asset market's compliant framework has gradually taken shape. However, to truly develop a deep and resilient Web3 ecosystem, asset issuance and trading are far from sufficient; progress is needed simultaneously in on-chain operational capabilities, yield models, and compliance guarantee systems. This introduction of on-chain staking mechanisms represents the first attempt to incorporate DeFi's native functions into traditional finance, establishing an institutionalized and sustainable yield linkage bridge between on-chain finance and traditional capital markets.
Additionally, in the context of global regulatory negotiations, Hong Kong's policy implementation has a forward-looking demonstration effect. The United States has not yet approved any staking ETFs, with primary controversies centered on asset ownership, potential security attributes, and risk control. Hong Kong, through custodial isolation, percentage caps, and risk disclosure measures, has explored a feasible prudent regulatory model, providing powerful reference for other jurisdictions.
In the future, whether the United States approves Ethereum ETF staking functionality may again significantly influence global virtual asset product design. As institutions like Coinbase and Grayscale continuously push policy communication, the SEC's attitude towards staking mechanisms might marginally soften. According to recent foreign media disclosures, some staking functionality pilot applications have entered final evaluation stages. If the United States ultimately approves, it will reignite global market attention to "staking ETF" related products and create competitive pressure on Hong Kong's existing product structures. However, before that, Hong Kong can attract more international capital focused on "on-chain yields" to the Asia-Pacific market through policy implementation speed and institutional clarity, further consolidating its leading position in the global virtual asset and digital financial innovation landscape.
Predictably, as more ETF managers submit staking plans and more trading platforms launch compliant staking services, Hong Kong will construct a virtual asset financial product system with richer yields, more reasonable structures, and more comprehensive systems. This will drive virtual assets from "tradable" to "configurable" and "value-added" new stages, satisfying investors' diverse demands and supporting continuous development of Hong Kong's virtual asset ecosystem.
