The regulatory body for securities in Hong Kong has released new guidelines permitting licensed cryptocurrency exchanges and funds to provide staking services within the city.
Staking enables cryptocurrency owners to utilize their digital assets to generate passive income while retaining ownership. It is a crucial component of Proof of Stake (PoS) networks, contributing to their security and permanence.
In a recent statement, the regulatory authority acknowledged the significant role of staking in fortifying the security of blockchain networks while also offering regulated investment opportunities that yield returns, as part of its ongoing initiative to enhance Hong Kong’s digital asset landscape under its “ASPIRe” strategy.
“Expanding the range of regulated services and products is essential for the sustained growth of Hong Kong’s virtual asset ecosystem,” stated the Chief Executive Officer of the regulatory body. “This expansion must occur within a controlled environment that prioritizes the safety of clients’ virtual assets.”
According to the rules detailed in a circular on staking, licensed exchanges, referred to as Virtual Asset Trading Platforms (VATPs), are required to maintain full control over client assets and must not outsource staking activities to third parties.
These platforms are also obligated to clearly communicate all risks associated with staking, which could include issues such as blockchain faults, hacking incidents, or validator downtime.
VATPs must inform clients about the procedures involved, applicable fees, minimum staking periods, and continuity planning during operational interruptions.
Additionally, authorized virtual asset funds are required only to stake through licensed platforms or approved entities, with restrictions to mitigate liquidity risks, reinforcing the regulator’s balanced yet cautious approach.
This stance contrasts with that of Singapore, Hong Kong’s competitor in the financial sector, which has prohibited retail staking, citing concerns over “investor protection.”
Meanwhile, the U.S. Securities and Exchange Commission (SEC) continues to impose limitations on staking via enforcement actions, despite increasing pressure from a bipartisan group of senators to reconsider its position.
Recent developments also include several states, including Illinois, dropping staking-related legal actions against major cryptocurrencies, which faced a myriad of lawsuits earlier this year.