ETH Staking Barred in New ETFs, Yet Hong Kong’s Regulator Explores Alternatives

By Jody McDonald May 24, 2024 In ETFs, Ethereum, Hong Kong
Ethereum coin on a bed of international fiat currency
  • US-based ETH spot ETFs look set to launch soon, but none of them will allow investors to earn any staking rewards.
  • Issuers of Hong Kong-based ETH spot ETFs, which launched last month, have reportedly been in talks with regulators to allow the addition of staking rewards via “licensed platforms”. 
  • According to sources discussions between ETF issuers and regulators have been “healthy”, but there is no timeline for when staking rewards might be approved.

It’s looking like Ethereum spot exchange traded funds (ETFs) will be launching on US exchanges sometime soon, after mass approval of 19b-4 applications on Thursday US-time. However, it also appears that these ETFs will exclude staking rewards, both for issuers and for investors—nobody will be allowed to earn staking rewards from these ETFs—making them considerably less attractive than buying Ethereum directly for many investors.

Enter Hong Kong. According to a report from Bloomberg, Hong Kong-based issuers of Ethereum spot ETFs are working with regulators to allow staking rewards, potentially clearing the way for ETF investors to earn passive income while enjoying the other benefits of ETFs over directly held Ethereum.

Related: Standard Chartered Predicts Ethereum Could Reach $8,000 by Year’s End 

US ETF Applications Explicitly Remove Possibility Of Staking

Several US Ethereum spot ETF issuers, including Fidelity and Grayscale, updated their applications recently to remove the possibility of staking, suggesting that removal of staking is a key requirement for the SEC to approve the applications.


Fidelity’s updated application provides an example of just how thoroughly staking rewards are being excluded from these ETFs:

Neither the Trust, nor the Sponsor, nor the Custodian, nor any other person associated with the Trust will, directly or indirectly, engage in action where any portion of the Trust’s ETH becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ETH or generate income or other earnings. The Trust will not acquire and will disclaim any incidental right (‘IR’) or IR asset received, for example as a result of forks or airdrops, and such assets will not be taken into account for purposes of determining NAV.

Fidelity’s updated ETF application

If you want to earn Ethereum staking rewards, you aren’t going to want one of these US-based ETFs.

Hong Kong Considers Allowing Staking Rewards

Bloomberg reports that several unnamed sources claim the city’s Securities and Futures Commission (SFC) has held talks in recent weeks with ETF issuers about the possibility of allowing staking services through “licensed platforms”.

The addition of staking rewards could make the Hong Kong-based ETFs, which launched in April to little fanfare, a more attractive option and further bolster Hong Kong’s reputation as a global digital asset hub. Currently, Ethereum staking rewards are around 3-4% annually.

Speaking to Bloomberg, Serra Wei, Chief Executive Officer at Aegis Custody, described talks between ETF issuers and the SFC as “healthy”, adding: 

It would be a milestone for Hong Kong to add staking into spot-ETH ETFs

Serra Wei, Chief Executive Office at Aegis Custody

Aegis Custody provides custody services to Hong Kong’s banks—Wei has not been directly involved in discussions between ETF issuers and the SFC.

Related: Breaking: Hong Kong Approves Ethereum and Bitcoin ETFs 

Bloomberg’s sources say that discussions are ongoing and there is no timeline for when (or if) staking rewards might be allowed for Ethereum spot ETFs.

Jody McDonald

Jody McDonald

Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.

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