Hong Kong may introduce staking for spot Ethereum exchange-traded funds (ETFs) as early as this year, according to Animoca Brands Chairman Yat Siu

Hong Kong asset managers are actively working on integrating staking into their spot Ethereum ETFs, aiming for approval by the end of the year. This initiative is expected to provide a competitive edge over U.S. counterparts, where such features are not currently allowed.

Yat Siu, Chairman of Animoca Brands, revealed in an interview with The Block that Hong Kong is engaged in discussions about Ethereum staking. He expressed optimism about the likelihood of approval in Asia before the U.S., calling it an “almost foregone conclusion.”

“There’s an optimistic side of me that wants it to happen within the year,” Siu said. He added that if there is no significant movement on staking within the year, the U.S. election outcomes could influence the speed of such developments in the States.

HashKey, co-manager of two spot Bitcoin and Ethereum ETFs in Hong Kong alongside Bosera, is crafting a proposal for Ethereum staking. “We’ve devised a plan to earn rewards without necessarily increasing risks,” said Livio Weng, CEO of HashKey Exchange, noting that more details are being discussed but cannot be disclosed yet.

Weng emphasized the goal of advancing Ethereum staking in a compliant and controlled manner. Similarly, Blockdaemon, a blockchain infrastructure provider, is in talks with Hong Kong ETF issuers and custodians to offer staking services. Glenn Woo, head of sales for APAC at Blockdaemon, conveyed a positive outlook on the approval of Ethereum staking based on recent discussions.

Woo highlighted the consensus among industry participants that staking is the “biggest missing piece” for Ethereum ETFs. He expressed hope that the feature would be approved soon, noting Blockdaemon’s experience with staking services for European exchange-traded products.

The Hong Kong Securities and Futures Commission did not immediately respond to requests for comment.

Despite the initial excitement around spot crypto ETFs in Hong Kong, their performance has lagged behind U.S. counterparts. The three Hong Kong spot Bitcoin ETFs recorded a total daily trading volume of $6.08 million on Thursday, while the 11 U.S. spot Bitcoin ETFs saw $1.42 billion in trading volume the same day.

“I agree with the premise that Hong Kong should attract buyers from both East and West,” Siu stated. “But it must be competitive, priced at least the same, if not lower, than its U.S. counterpart.”

Staking rewards could serve as a significant competitive advantage for Hong Kong’s spot Ethereum ETFs, as the U.S. Securities and Exchange Commission has not permitted such features. “That could be a competitive edge because if you are able to get staking, then there is a benefit for that,” Siu noted. “I think of this as baby steps — the first steps. Now, the industry has to push on other areas to open it up. I think staking could be the big differentiator for Hong Kong.”

Woo echoed Siu’s sentiments, noting that the lack of a staking feature is deterring many potential Ethereum ETF buyers. “The potential opportunity cost of 3% to 4% is pretty big,” he said. Woo added that the Hong Kong government and regulators are aware of this gap and are motivated to act swiftly. “Education and the ETF issuers’ potential staking strategy will need to be well communicated to the regulator,” he concluded.

As Hong Kong's asset managers and regulators push forward, the introduction of staking for spot Ethereum ETFs could reshape the competitive landscape, providing a new impetus for investment in the region.