Hong Kong is considering the possibility of introducing staking for exchange-traded funds (ETFs) that directly invest in cryptocurrencies.

The Securities and Futures Commission (SFC) has engaged in discussions with the city’s crypto ETF issuers regarding the potential provision of staking services through licensed platforms.

These discussions have been prompted by recent proposals, although a definitive timeline for a decision has not yet been established.

If approved, the implementation of staking could potentially boost demand for Hong Kong’s spot-crypto ETFs, which have experienced only moderate interest since their launch in April.

This strategic move could also position Hong Kong ahead of the US, where similar initiatives are under consideration.

Staking offers investors the opportunity to generate passive income by locking tokens on the Ethereum network to aid in validating transactions. Presently, Ether staking provides a proportional return.

Serra Wei, CEO of Aegis Custody, expressed that the discussions between Hong Kong ETF issuers and regulators on staking have been constructive.

She is of the opinion that integrating staking into spot-ETH ETFs would be in line with the local regulatory framework. Aegis Custody offers custody technology solutions to banks in Hong Kong.

Wei, who has not been directly involved in the discussions with the SFC, emphasized that the incorporation of staking into spot-ETH ETFs would represent a significant accomplishment for Hong Kong.

In the competitive landscape, Hong Kong is vying with cities like Singapore and Dubai to establish itself as a central hub for digital assets, following the establishment of a dedicated regulatory regime last year.

The city is striving to rebuild its status as a modern financial center after a crackdown on dissent tarnished its appeal. In addition to ETFs, Hong Kong is reviewing several applications to expand its roster of licensed digital asset exchanges.

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Furthermore, the city is in the process of formulating a framework for stablecoins, which are typically pegged 1-1 to fiat currency and backed by reserves of cash and bonds.

In other news, Bitcoin has cut its decrease to 2.54% in a day, closing at 67,845.21875 USDT after falling below 68,000 USDT, according to Binance Market Data.

Stay updated for more news on the latest developments in the cryptocurrency market, as Hong Kong continues to make progress in the digital asset space.