Hong Kong Virtual Asset ETF Staking New Policy: On-chain Yield and Innovation in TradFi Integration

The Hong Kong regulatory authority recently issued an important circular allowing virtual asset spot ETFs to participate in on-chain staking activities under a prudent regulatory framework, while also relaxing related restrictions on virtual asset trading platforms, permitting them to offer staking services to clients. This initiative represents another significant breakthrough in Hong Kong's exploration of a compliant Web3 financial system, which not only helps enhance the attractiveness of Hong Kong's virtual asset ecosystem but also marks the first time that traditional financial products have been integrated with the native mechanisms of the on-chain economy, providing a highly demonstrative model for global virtual asset regulation and financial innovation.

Introducing Staking Mechanisms into TradFi

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 operations but also serves as the main channel for institutions and users to obtain on-chain rewards. Data shows that as of early April 2025, over 34 million ETH have been staked on the Ethereum network, accounting for 28.03% of its total supply; projects like Cardano and Solana have also maintained a staking rate of over 70% for a long time.

Hong Kong regulators allow virtual asset spot ETFs to participate in on-chain staking, indicating their recognition of staking as a core mechanism for obtaining network incentives within the public chain ecosystem, possessing reasonable economic logic. At the same time, this also demonstrates that regulators' understanding of virtual assets and the Web3 ecosystem's technology, as well as their risk management capabilities, are becoming increasingly mature.

To ensure that risks are controllable, 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 security of the assets. ETF managers are also required to fully disclose key information such as the staking operation mechanism, profit calculation model, potential risks, and the cap on the staking ratio, in order to protect investors' right to be informed and their asset rights.

Regulators have simultaneously revised the relevant restrictions on trading platforms, explicitly allowing them to provide stake services to customers. This not only expands the service boundaries of trading platforms, enabling them to offer value-added services to enhance user stickiness and trading volume, but also provides a reliable and compliant execution environment for spot ETF participation in staking.

The Impact and Significance of Stake Introduction

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 staking mechanisms will significantly enhance the attractiveness and scale of virtual asset spot ETF products, making them no longer just passive trackers of price trends, but rather "on-chain equity certificates" with active yield functions.

The additional annualized return of 3%-6% brought by staking will become an important factor in attracting institutional investors, family offices, and other medium to long-term funds. It is expected that within the next 6 to 12 months, as the staking mechanism gradually takes shape, the management scale of virtual asset spot ETFs in Hong Kong is expected to achieve structural growth.

At the same time, the profit-sharing mechanism of staking returns will broaden the income structure for fund managers and custodians, incentivizing more market participants to design innovative product structures within a compliant framework, further enhancing the differentiation and competitiveness of virtual asset-related products in Hong Kong. Furthermore, due to the high requirements for asset security and technical stability in staking operations, the potential compliance staking demand will drive Hong Kong to accelerate the construction of virtual asset infrastructure, forming a more mature and complete Web3 ecosystem.

Building a Web3 Financial Ecosystem Closed Loop

The recent launch of staking services in Hong Kong reflects a deep consideration in institutional design: based on ensuring investor rights and controllable risks, it promotes the development of Hong Kong's virtual asset market towards a more mature and international stage.

The introduction of the staking mechanism not only brings additional sources of income but also provides ETFs with a closer linkage to the on-chain ecosystem, which is expected to attract a broader range of investors, especially those institutional investors who focus on balancing "returns + asset allocation."

From a deeper perspective, the open ETF staking is an important step for Hong Kong to build a closed-loop Web3 financial ecosystem. The introduction of the on-chain staking mechanism is the first attempt to incorporate the native functions of DeFi into TradFi, 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-based ETFs, while Hong Kong has explored a feasible prudent regulatory model through measures such as custody isolation, proportion limits, and risk disclosure, providing strong reference for other jurisdictions.

In the future, as more ETF managers submit staking plans and more trading platforms launch compliant staking services, Hong Kong will establish a virtual asset financial product system that is richer in returns, more structurally sound, and more complete in its regulations. This will promote the shift of virtual assets from being "tradable" to being "configurable" and "appreciable," entering a new stage to meet the diverse needs of investors and support the continuous development of Hong Kong's virtual asset ecosystem.