- Hong Kong could launch Ethereum staking ETFs within the next six months.
- Other crypto products, like a Uniswap ETF or Chainlink ETF, may follow.
- The Bitcoin and Ethereum ETFs launched in April have been warmly received by Hong Kong’s financial sector.
Ethereum staking exchange-traded funds are coming to Hong Kong — it’s just a matter of time.
That’s according to Vivien Wong, partner at HashKey Capital, a crypto asset management firm that played a vital role in getting Hong Kong’s spot Bitcoin and Ethereum ETFs off the ground.
“As soon as spot Ethereum ETFs were approved in the US, people ran to us asking, ‘are you planning to launch an Ether staking product?’” Wong told DL News.
She said regulators, like Hong Kong’s Securities and Futures Commission, were talking with the industry.
“Last month, I sent a message to regulators to say there was a need for Ether staking,” Wong said. “Without hesitating, they said ‘okay, please send a detailed proposal.’”
The timing of her comments is notable.
Nine spot Ethereum ETFs are expected to launch in the US any day now, as soon as the Securities and Exchange Commission finalises applications.
Staking Ethereum ETFs
Ethereum is designed so users can choose to lock in their Ether holdings and earn a 3% yield on the asset — a process called staking.
While spot Ethereum ETFs enable investors to easily get exposure to Ether through their brokerage accounts, they don’t allow them to gain that extra yield.
In fact, in Hong Kong, holders of these ETF shares must pay a management fee that’s anywhere between 0.3% and 0.99%, depending on the fund they choose.
“For a new Ethereum product to launch, it will probably require another six months or so,” Wong said.
Waiting for the mainland
Hong Kong is so keen to offer products that don’t yet exist in the US, because the government wants the city to become a fintech powerhouse, according to Wong.
And the process is running “pretty smoothly,” she said.
Already, the existing crypto ETFs are attracting two types of investors: People who simply want to “buy and hold,” and crypto natives, Wong said. Crypto natives, in particular, have been enticed by the ETF design.
The funds’ timely creation and redemption process allows investors to use them for over-the-counter trading purposes, according to Wong.
But by taking the lead and offering advanced products, the hope is for Hong Kong to draw in investors from other jurisdictions — and even, eventually, from the mainland.
Mainland investors cannot currently invest in these products. But hopefully, if the regulatory situation changes, “there will be more endorsements from investors in China and we will see more inflows,” Wong said.
”We are waiting for that to open up this market,” she added.
Massive success
Hong Kong’s crypto ETFs have hauled in almost $260 million in assets since they launched in April, per The Block data.
Compared to spot Bitcoin ETFs in the US — which have brought in $14.6 billion since January 11 — that might feel small.
But considering that Hong Kong’s ETF market is 168 times smaller than its US counterpart, the products have been a massive success. “There is definitely excitement,” Wong said.
Whether its financial institutions, wealth managers, distributors, or high net-worth individuals, the entire Hong Kong market is slowly digesting the products and becoming more comfortable with them, she said.
It wasn’t a guaranteed win.
Opinion about crypto had soured in the region after some of the scandals from the last bear market — notably the fraud case surrounding Hong Kong crypto exchange JPEX.
Uniswap ETF?
Wong said that other cryptocurrencies will possibly have their own ETFs someday, but none of the choices are obvious, she said.
For Hong Kong regulators to approve new crypto ETFs, the underlying token must be publicly tradable through registered virtual asset trading platforms.
And it must be very liquid, meaning that it must be easy for deep-pocketed market participants to trade.
Having a robust use case doesn’t hurt either.
”ERC-20 tokens would be generally preferred,” Wong said, referring to tokens issued on the Ethereum network. “Some names like Chainlink or Uniswap.”
And a Solana ETF might be in the cards as well.
“We are talking with the SFC right now,” Wong said. “We are getting on with launching new products.”
Update: The piece was modified to clarify that investors from mainland China will only be able to invest in the ETFs when Chinese regulation allows it.
Tom Carreras is a markets correspondent for DL News. Got a tip about Hong Kong and crypto ETFs? Reach out at tcarreras@dlnews.com.