The Impact of the Hong Kong Securities and Futures Commission's Approval of Ethereum ETF Stake Services on the Crypto Market

Introduction

On April 7, 2025, during the Hong Kong Web3 Carnival, the Hong Kong Securities and Futures Commission issued a circular regarding the provision of stake services by virtual asset trading platforms. The regulatory body acknowledged the potential benefits of stake in enhancing the security of blockchain networks and allowing investors to earn returns.

After the announcement of the circular, Huaxia Fund and Bosera Fund, which have issued Ethereum spot ETFs, responded quickly. On April 11, Bosera Fund announced that its Ethereum ETF was approved to stake up to 30% of its Ethereum holdings starting from April 25. On April 18, Huaxia Fund also announced that it would launch staking services for its Ethereum ETF, becoming the second fund in Hong Kong to provide such services.

Staking is an important feature of PoS public chains. Investors can stake their PoS public chain governance tokens to nodes or liquidity staking platforms to receive network income distribution. This not only allows for token appreciation income but also provides active earnings.

In contrast, although several public funds in Hong Kong have launched Bitcoin ETF products, PoW public chains are not designed with a staking mechanism. As custodians, Bitcoin ETF funds do not have the authority to lend out client assets, so investors cannot obtain additional returns through staking.

The Hong Kong Securities and Futures Commission approved Ethereum ETF staking services earlier than the United States, marking a milestone in Hong Kong's development as a Web3 hub. This not only reflects the regulatory body's in-depth research on on-chain yield mechanisms but also showcases the Hong Kong government's open attitude towards the crypto industry. For traditional financial investors, the actual returns of ETF staking services will be a focal point of concern. The following text will analyze ETH staking yields and their impact on Hong Kong's Web3 industry.

1. ETH stake yield analysis

The Ethereum ETFs from Huaxia Fund and Bosera Fund are respectively provided with staking nodes by OSL and Hashkey exchanges. As the specific amounts allocated to investors have not yet been disclosed, this article will reference on-chain ETH staking yields.

1.1 ETH staking mechanism and on-chain rewards

The staking mechanism of the Ethereum public chain can be summarized as follows: The public chain is composed of distributed nodes, and nodes must stake 32 ETH to gain block production rights. In addition to block rewards, nodes can also earn MEV income and tips. If ETH holders do not have enough funds, they can indirectly obtain node revenue sharing through staking service providers.

ETH stake yield = ( block reward + MEV + Tips) / total value of staked ETH

According to data statistics, during the bear market in November 2022, the ETH staking APY stabilized at over 5%, while in the bull market in December 2024, it was only around 3.3%. In May 2025, the ETH staking APY was 3.07%, which is not considered a high-yield product from an investment perspective.

The volatility of staking yields is mainly influenced by MEV and Tips. Taking May 9, 2023, as an example, the ETH staking APY that day reached 10.66%, with a block reward yield of 3.81%, MEV income of 3.54%, and Tips income of 3.31%. This is related to the surge in on-chain activities triggered by the popularity of PEPE coin at that time.

1.2 ETH vs SOL stake yield comparison

Compared to other public chains, the staking yield of ETH is not very competitive. In May 2025, the staking yield of SOL reached 8.70%, which is 5% higher than ETH. Currently, the staking rate of SOL is 67.97%, while ETH is only 28.56%.

One important reason for the decline in ETH staking yield is the EIP-1559 proposal. This proposal aims to reduce the inflation rate of ETH and optimize the economic model. After implementation, nodes only receive Tips income, and the base Gas fee is burned, ensuring the deflationary mechanism of ETH. In contrast, Solana takes a middle approach, burning 50% of the base fee and giving 50% plus Tips as rewards to nodes.

For traditional investors, the ETH ETF staking service enhances returns without increasing operational barriers, marking a milestone in the transition from Web2 to Web3. Investors can view it as an additional dividend of around 3% based on token assets.

2. Hong Kong ETH ETF staking is a long-tail favorable policy

Compared to Hong Kong and the United States, the U.S. launched the Bitcoin ETF earlier, but Hong Kong is one step ahead in Ethereum ETF. In April 2024, Hong Kong approved the establishment of the Ethereum ETF, and the product was quickly implemented. The U.S. did not approve the Ethereum ETF until May 2024, and it officially went live at the end of July.

However, the United States still has an overwhelming advantage in liquidity. By the end of 2024, the largest Ethereum ETF in the United States will reach $3.584 billion, while the total size of three Ethereum ETFs in Hong Kong is only $6.346 million, about 1% of that in the United States.

In theory, Hong Kong ETFs gain gas revenue through staking services, which gives them a competitive advantage over US ETFs. However, after the staking service was launched in April 2025, there was no significant increase in subscriptions for Hong Kong ETFs. As May approached, the price of ETH rose, leading to a small net inflow for Hong Kong ETFs, but US ETFs did not experience significant outflows, instead showing a net inflow.

This phenomenon can be explained from the following perspectives:

1. The liquidity of the Hong Kong market is not as abundant as that of the United States.
2. It is difficult for American investors to register a securities account in Hong Kong.
3. Traditional investors still have a barrier to understanding the concept of "stake".

Hong Kong's approval of ETF staking is a long-tail favorable policy, which is unlikely to significantly increase scale in the short term. As market education deepens and infrastructure improves, the long-tail effect of this policy is expected to gradually become apparent.

3. The Prospects of the Ethereum Ecosystem in Hong Kong and the Development of RWA

Hong Kong's first-mover advantage in Ethereum ETF and staking services reflects its emphasis on the RWA sector. Ethereum is currently the public chain with the highest total value of RWA assets, with over $7 billion in on-chain RWA assets and over $120 billion in stablecoin assets as of May 2025, both ranking first among public chains.

In August 2024, the Hong Kong Monetary Authority launched the Ensemble sandbox project to promote tokenization applications. In February 2025, Huaxia Fund launched the first retail tokenized fund in the Asia-Pacific region, with underlying assets being Hong Kong dollar short-term deposits, issued on the Ethereum blockchain. These initiatives demonstrate Hong Kong's determination to develop RWA.

The implementation of ETH staking services may represent Hong Kong's increased participation in Ethereum network governance to develop RWA as a key track. Major ETH nodes have significant influence in ecological governance. By staking, Hong Kong not only enhances user returns but also strengthens its influence in the Ethereum community, thereby promoting the compliant development of the RWA ecosystem.

4. Conclusion

Hong Kong's policy breakthroughs in the Ethereum ecosystem and its layout in the RWA sector have laid the foundation for future development. By approving ETH ETF staking, Hong Kong has strengthened its position as Asia's Web3 innovation center and demonstrated strategic vision in the RWA field. The Ethereum network, with its advantages in RWA assets, has become a bridge connecting traditional finance and the crypto world.

With more tokenization projects of physical assets being implemented, Hong Kong is attracting RWA projects with policy benefits and technical compatibility. In the future, as the governance discourse power of Ethereum increases and the stake model is optimized, Hong Kong is expected to become a key node for the issuance, trading, and compliance of RWA assets in Asia, fostering more innovative practices between the real economy and blockchain technology.