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Hong Kong is reportedly considering including an ethereum staking option for ethereum spot exchange-traded fund (ETF) issuers.
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 their crypto tokens for a specific period and earn rewards as a percentage of the tokens staked as a reward. This process is facilitated by various third-party engagement services that meet the needs of users. Basically, staking is a way to earn rewards (extra money) by holding specific cryptocurrencies.
This move by Hong Kong contrasts with the US Securities and Exchange Commission's (SEC) perception of gambling, which sees it as an investment contract and a violation of securities laws. A global adaptation of spot betting on ETFs could fuel ongoing debates about the practice in the United States.
The role of betting in the US
Coinbase has been advocating for staking in the US and has been fighting the SEC over the legality of the practice. Coinbase believes that core staking is not a security as 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 ministerial maintenance rather than conventional investment efforts.
In February, crypto.news reported that 55% of cryptocurrency investors in Singapore had staked cryptocurrencies through a centralized exchange, indicating strong optimism towards staking. Staking is popular in other global crypto hotspots.
On Wednesday, the US House of Representatives passed the Financial technology and Innovation for the 21st Century (FIT21) Act, essentially telling the cryptocurrency industry that the US welcomes cryptocurrencies. Additionally, the SEC approved ethereum spot ETFs, causing the price of ethereum (eth) to rise to over $3,900 at the time of writing.
However, due to the SEC's stance on staking, many US-based companies, such as Fidelity Investments, have not made plans to bet on their upcoming ethereum ETFs.
