Hong Kong Allows Virtual Asset ETFs to Participate in Stake: Deep Integration of On-Chain Finance and Traditional Markets

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 a prudent regulatory framework, while also relaxing relevant restrictions on virtual asset trading platforms, allowing licensed trading platforms to offer staking services to clients. This initiative not only helps enhance the attractiveness of Hong Kong's virtual asset ecosystem but also marks the first time that traditional financial products are combined with the native mechanisms of the on-chain economy, providing a highly exemplary model for global virtual asset regulation and financial innovation.

1. The staking mechanism introduces traditional financial systems, creating a compliant on-chain income path.

The staking mechanism 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 returns. According to statistics, as of early April 2025, over 34 million ETH have 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 income mechanism, has a strong market consensus foundation.

Hong Kong allows virtual asset spot ETFs to participate in on-chain staking, releasing two important signals: first, regulators recognize staking as a core mechanism for obtaining network incentives in the public chain ecosystem, which has reasonable economic logic; second, regulators' technical understanding and risk management capabilities regarding virtual assets and the Web3 ecosystem are maturing.

To ensure manageable risks, the circular stipulates that participation in staking for spot ETFs must be conducted and custodized through licensed trading platforms and authorized institutions, and sets a cap on the staking ratio to manage liquidity risks, ensuring the independence and safety of assets. ETF managers are also required to fully disclose key information such as the staking operational mechanism, yield calculation models, potential risks, and the cap on the staking ratio, to protect investors' right to know and their asset rights.

At the same time, the Securities Regulatory Commission revised the previous restrictions on trading platforms, explicitly allowing trading platforms to offer stake services to clients. This not only expands the service boundaries of trading platforms, enabling them to provide value-added services to enhance user stickiness and trading volume, but also provides a trustworthy and compliant execution environment for spot ETF participation in staking.

For virtual asset spot ETFs, the essence of staking is the "reuse" of underlying assets, which can create additional income without affecting the ETF share structure, providing compliant "on-chain yield channels" for more users and institutions. The introduction of the staking mechanism will significantly enhance the attractiveness and scale of virtual asset spot ETF products, transforming them from merely passive trackers of price trends into "on-chain equity certificates" with active yield functions. It is expected that in the next 6 to 12 months, as the staking mechanism gradually takes effect, the management scale of virtual asset spot ETFs in Hong Kong is likely to achieve structural growth.

In addition, the profit-sharing mechanism of staking yields will broaden the revenue structure for fund managers and custodians, incentivizing more market participants to design innovative products within a compliant framework. Due to the high requirements for asset security and technological stability in staking operations, the potential demand for compliant staking will drive Hong Kong to accelerate the construction of virtual asset infrastructure, forming a more mature and complete Web3 ecosystem.

2. Build a bridge for the income linkage between traditional finance and on-chain economy

The release of staking services in Hong Kong reflects deep considerations in system design: promoting the development of Hong Kong's virtual asset market towards a more mature and internationalized stage while ensuring investor rights and controllable risks.

The primary motivation lies in the reinforcement and optimization of the operational mechanism of the local ETF market. Since the first batch of virtual asset spot ETFs was approved for listing and trading in Hong Kong in 2024, although the market response has been rational and the product mechanism robust, the overall trading activity and asset management scale have not yet met expectations. The introduction of the stake mechanism can not only bring additional sources of income but also provide ETFs with a closer linkage to the blockchain ecosystem, which is expected to attract a broader investor base, especially institutional investors who focus on the balance of "yield + asset allocation."

From a deeper perspective, the open ETF staking is an important step for Hong Kong to build a Web3 financial ecosystem. The introduction of the on-chain staking mechanism is the first attempt to incorporate the native functions of DeFi into traditional finance, establishing an institutionalized and sustainable yield linkage bridge between on-chain finance and traditional capital markets.

Against the backdrop of global regulatory games, Hong Kong's policy implementation has a forward-looking demonstration effect. The United States has not yet approved any stake-type ETFs, while Hong Kong has explored a feasible prudent regulatory model through measures such as custody isolation, proportion limits, and risk disclosure, providing a strong reference for other jurisdictions.

In the future, whether the United States approves the Ethereum ETF staking feature will once again have a significant impact on the design of global virtual asset products. If the U.S. ultimately approves it, it will trigger renewed attention from the global market towards "staking ETFs" related products and will also create competitive pressure on the existing product structure in Hong Kong. However, before that, Hong Kong, with its speed in 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 further solidifying its leading advantage in the global virtual asset and digital financial innovation landscape.

As more ETF managers submit staking plans and more trading platforms launch compliant staking services, Hong Kong will build a financial product system for virtual assets that is richer in returns, more reasonable in structure, and more complete in its system. This will drive virtual assets from a "tradable" stage to a new stage of "configurable" and "appreciable" to meet the diverse needs of investors and support the sustainable development of Hong Kong's virtual asset ecosystem.