Major Breakthrough in Hong Kong's Virtual Asset Ecosystem: ETF Stake Approved, On-chain Returns Become a Reality

Hong Kong has made significant progress in promoting the compliance of virtual asset financial products. Recently, the Hong Kong Securities and Futures Commission issued a circular that clearly allows virtual asset spot ETFs to participate in on-chain staking activities under strict regulation. At the same time, the regulatory authority has also relaxed related restrictions on virtual asset trading platforms, allowing licensed platforms to provide staking services to customers. This initiative is expected to enhance the attractiveness of Hong Kong's virtual asset ecosystem and marks the first time that traditional financial products are combined with the native mechanisms of the on-chain economy, setting a new benchmark for global virtual asset regulation and financial innovation.

Staking Mechanism: Linking Traditional Finance with On-chain Economy

Staking has become one of the most important on-chain economic activities in the virtual asset ecosystem, especially for public chains that adopt the Proof of Stake (PoS) consensus mechanism. It not only maintains network security and normal operation but also serves as the main channel for institutions and users to obtain on-chain earnings. According to statistics, by early April 2025, more than 34 million ETH had been staked in the Ethereum network, accounting for 28.03% of its total supply; other projects like Cardano and Solana also maintain a staking rate of over 70% for a long time, demonstrating that staking, as an on-chain earning mechanism, has a strong market consensus foundation.

The new regulations allow Hong Kong's virtual asset spot ETFs to participate in on-chain staking under strict controls to obtain native yields associated with blockchain networks. This indicates that regulators not only recognize staking as a core mechanism for obtaining network incentives within the public chain ecosystem but also demonstrate an improved understanding of the technology and risk management capabilities regarding virtual assets and the Web3 ecosystem.

To ensure controllable risks, the circular requires that the spot ETF must operate and custody the staked assets through licensed trading platforms and authorized institutions, and set a cap on the staking ratio to manage liquidity risks. The ETF manager must also fully disclose key information such as the staking operation mechanism, yield calculation model, potential risks, and the cap on the staking ratio, in order to protect investors' rights.

At the same time, regulators have revised the previous restrictions on trading platforms, allowing licensed platforms to offer staking services to clients. This not only expands the range of services provided by trading platforms but also provides a reliable compliance execution environment for spot ETF participation in staking.

The Impact and Opportunities Brought by Staking

For virtual asset spot ETFs, staking is essentially a "reuse" of the underlying assets, creating additional income without affecting the structure of ETF shares, and providing a compliant "on-chain income channel" for more users and institutions. The introduction of the staking mechanism will significantly enhance the attractiveness and scale of virtual asset spot ETF products.

Traditional ETFs rely mainly on asset price fluctuations or dividends for returns, while the introduction of the staking mechanism allows virtual asset spot ETFs to no longer be just passive trackers of price trends, but to become "on-chain equity certificates" with active income functions. An additional annualized return of 3%-6% is expected to attract more institutional investors and medium to long-term capital. In the next 6 to 12 months, as the staking mechanism is gradually implemented, the management scale of Hong Kong's virtual asset spot ETFs is expected to achieve significant growth.

The profit-sharing mechanism of staking rewards will also broaden the revenue structure between fund managers and custodial institutions, encouraging more market participants to design innovative products within a compliant framework, further enhancing the differentiation and competitiveness of virtual asset-related products in Hong Kong. Furthermore, due to the high demands for asset security and technical stability in staking operations, this will also accelerate Hong Kong's virtual asset infrastructure development, creating a more mature and complete Web3 ecosystem.

Building a Web3 Financial Ecosystem Loop

Hong Kong's recent launch of staking services reflects the deep considerations of regulatory agencies in institutional design: promoting the development of Hong Kong's virtual asset market towards a more mature and international direction while ensuring investor rights and risk control.

Since the approval of the first batch of virtual asset spot ETFs for trading, the Hong Kong virtual asset market has been operating steadily, but the overall trading activity and asset management scale have not yet met expectations. The introduction of a stake mechanism can not only bring additional returns but also establish a closer connection between ETFs and the blockchain ecosystem, which is expected to attract a wider range of investors, especially institutional investors who focus on balancing "returns + asset allocation."

Moreover, the introduction of open ETF staking is a key step for Hong Kong in building a closed-loop Web3 financial ecosystem. Since the establishment of the licensing mechanism for virtual asset service providers and the allowance for retail investors to participate in trading, the compliance framework of Hong Kong's virtual asset market has gradually taken shape. However, to establish a truly deep and resilient Web3 ecosystem, it is necessary to simultaneously advance in areas such as on-chain operational capabilities, revenue models, and compliance protection systems. The introduction of an on-chain staking mechanism is the first attempt to integrate DeFi's native functionalities into traditional finance, establishing an institutionalized and sustainable revenue linkage bridge between on-chain finance and traditional capital markets.

Against the backdrop of global regulatory competition, Hong Kong's policy implementation has a forward-looking demonstration effect. The United States has not yet approved any stake-type ETF, with the main controversies focusing on asset ownership, potential securities attributes, and risk control issues. Hong Kong, through measures such as custodial isolation, proportion limits, and risk disclosure, has explored a feasible prudential regulatory model, providing a strong reference for other regions.

In the future, whether the United States approves the Ethereum ETF staking function may have a significant impact on the design of global virtual asset products. If the United States ultimately approves it, it will trigger renewed attention from the global market on "staking ETFs" related products, which will also create competitive pressure on the existing product structure in Hong Kong. However, before that, Hong Kong, with its speed of policy implementation and clarity of systems, is expected to attract more international capital focused on "on-chain yields" to flow into the Asia-Pacific market, thereby consolidating its leading position in the global virtual assets and digital finance innovation landscape.

As more ETF managers submit staking plans and more trading platforms launch compliant staking services, Hong Kong will build a virtual asset financial product system that is richer in returns, more structured, and more complete in its regulations. This will promote the transition of virtual assets from "tradeable" to "configurable" and "appreciable," entering a new stage that meets the diverse needs of investors and supports the sustainable development of Hong Kong's virtual asset ecosystem.