Hong Kong has taken another significant step in legitimizing virtual asset financial products. On April 7, 2025, the Securities and Futures Commission (SFC) issued a circular permitting virtual asset spot ETFs to engage in on-chain staking under a prudential regulatory framework. Concurrently, licensed trading platforms were authorized to offer staking services to clients.
👉 Explore Hong Kong's groundbreaking virtual asset policies
1. Integrating Staking into Traditional Finance: A Compliant On-Chain Revenue Model
Staking has become a cornerstone of virtual asset ecosystems, particularly for Proof-of-Stake (PoS) blockchains. Key statistics highlight its adoption:
- Ethereum: 28.03% of total ETH supply staked (~34M ETH)
- Cardano/Solana: >70% staking rates
The SFC's framework mandates:
- Staking via licensed platforms only
- Asset segregation and custody by authorized institutions
- Disclosure requirements for risk/return mechanisms
Notably, the policy extends beyond ETH—platforms may offer staking for ADA, SOL, and other PoS assets. This expansion creates new revenue streams for ETF managers while enhancing Hong Kong's Web3 infrastructure.
Expected outcomes:
- 3-6% additional annualized yields for ETF investors
- Increased institutional participation
- Growth in ETF AUM within 6-12 months
2. Bridging Traditional Finance and On-Chain Economies
This policy addresses two critical needs:
- ETF Market Enhancement: Staking adds yield-generating capacity to previously single-dimensional products
- Web3 Ecosystem Development: Establishes institutional-grade links between DeFi and traditional markets
👉 Compare staking yields across platforms
Global Regulatory Implications
While the US debates staking ETF approvals, Hong Kong's proactive stance positions it as:
- A leader in virtual asset innovation
- An attractive destination for yield-seeking capital
- A model for risk-managed adoption of on-chain mechanisms
FAQ Section
Q1: Which virtual assets qualify for ETF staking?
A1: Initially ETH, with potential expansion to other PoS assets like ADA and SOL pending platform approvals.
Q2: How are staked assets protected?
A2: Licensed platforms must implement custody isolation, insurance safeguards, and real-time monitoring.
Q3: What risks should investors consider?
A3: Slashing penalties, liquidity constraints during unbonding periods, and smart contract vulnerabilities.
Q4: How does this impact Hong Kong's Web3 hub status?
A4: Accelerates institutional adoption and strengthens the territory's position as Asia's virtual asset gateway.
Q5: Are staking rewards taxed?
A5: Current guidelines treat them as income, but specific tax treatments may evolve.
Q6: When will these changes take effect?
A6: First staking-enabled ETFs expected Q3 2025, with platform services rolling out progressively.
Future Outlook
The policy signals Hong Kong's commitment to:
- Mature virtual asset markets
- Institutional-grade Web3 infrastructure
- Global leadership in digital finance innovation
As staking mechanisms mature, expect:
- More sophisticated yield products
- Cross-border regulatory cooperation
- Increased competition with other financial hubs