This move aligns with the SFC's "ASPIRe" roadmap⁶ to further develop Hong Kong’s virtual asset ecosystem. The SFC and HKMA recognise that staking can improve blockchain security and provide yield opportunities for investors within a regulated environment. Their guidance allows AIs and licensed VATPs to expand their product and service offerings.

What is staking?

In the HKMA and the SFC's guidance, "staking" refers to the process of committing or locking virtual assets for a validator to participate in a blockchain protocol’s validation process based on a proof-of-stake consensus mechanism, with returns generated and distributed for that participation while "Staking Services" refers to any arrangements which involve staking.

Staking Services

The HKMA guidance sets out standards expected of AIs which provide Staking Services from custodial services to their clients. Similarly, the SFC guidance sets out the regulatory approach and expected standards in respect of licensed VATPs that wish to provide Staking Services to their clients.

The HKMA and SFC's guidance outlined the following expected standards:

1. Internal controls: Broadly, an AI or a licensed VATP should maintain effective internal controls to ensure the "staked" client virtual assets are adequately safeguarded, manage operational risks and address conflicts of interest that may arise.
2. Disclosure of information: An AI or a licensed VATP should disclose information about its Staking Services, including the specific virtual assets for which Staking Services are provided, any third parties involved in providing such services, fees and charges, minimum lock-up periods, risks that clients may be exposed to in using its Staking Services etc.
3. Blockchain protocol selection and third-party service providers: An AI or a licensed VATP should act with due skill, care and diligence when including a blockchain protocol for providing Staking Services. Where the provision of Staking Services involves outsourcing to a third-party service provider, it should perform proper due diligence and conduct ongoing monitoring on the third party.

Before engaging in Staking Services, an AI should discuss with the HKMA in advance. A licensed VATP interested in providing Staking Services should obtain the SFC’s prior written approval. The SFC will impose specific conditions (Terms and conditions for providing Staking Services⁷) on a VATP’s licence before it may provide Staking Services.

SFC-authorised VA Funds which wish to engage in staking or virtual asset related activities

Additional requirements which apply where an SFC-authorised VA Fund engages in staking and other virtual asset-related activities include:

1. Ensuring that the virtual asset-related activities are consistent with the SFC-authorised VA Fund’s investment objective and strategy.
2. Implementing robust internal controls to monitor and manage material risks and conflicts of interest which may arise from the virtual asset-related activities, as well as establish appropriate custody arrangement, in the best interests of investors for investor protection.
3. Performing proper due diligence and conduct ongoing monitoring on the licensed VATPs or AIs and their Staking Services, counterparties and service providers engaged for the virtual asset-related activities.
4. Notifying investors if engaging in the virtual asset-related activities will result in a material change to the SFC-authorised VA Fund’s existing investment objective and strategy, or a material change or increase in the SFC-authorised VA Fund’s overall risk profile. The management company should also assess whether shareholders' approval and/or amendments to constitutive documents are required.
5. Ensuring that the offering documents, including the key fact sheet, of the SFC-authorised VA Fund disclose relevant information about the staking arrangement/virtual asset-related activities.
6. Ensuring that appropriate disclosures are made in the SFC-authorised VA Funds' interim and annual reports.

Further, where an SFC-authorised VA Fund engages in staking, the management company of such funds should ensure, amongst others: (a) the SFC-authorised VA Fund should only engage in staking through licensed VATPs or AIs subject to a cap reasonably determined by the management company taking into account the liquidity needs and investment strategy of the SFC-authorised VA Fund, and (b) the SFC-authorised VA Fund’s staked virtual asset holdings remain under custody by the licensed VATP or AI.

Prior consultation with and approval of the SFC is required where an existing SFC-authorised VA Fund intends to engage in staking and other virtual asset-related activities.

Key take-aways

The SFC and HKMA's new guidance represents a significant step towards integrating staking within the regulated environment of Hong Kong's virtual asset market. Businesses and investors engaging, or intending to engage, in staking or other virtual asset-related activities in Hong Kong should plan ahead and seek professional support to fully understand the potential legal and regulatory implications.

For detailed guidance and compliance assistance, please contact our legal team.

1 Provision of Staking Services for Virtual Assets from Custodial Services.

2 Circular on staking services provided by virtual asset trading platforms | Securities & Futures Commission of Hong Kong.

3 SFC-authorised VA Funds are investment funds with exposure to virtual assets of more than 10% of their net asset value which are authorised under section 104 and 105 of the Securities and Futures Ordinance for public offering in Hong Kong.

4 Circular on SFC-authorised funds with exposure to virtual assets | Securities & Futures Commission of Hong Kong.

5 FAQs-on-the-Code-on-Unit-Trusts-and-Mutual-Funds_20250407.pdf.

6 For details please see the "ASPIRe" roadmap issued on 19 February 2025 and our previous client of 24 March 2025: Hong Kong: SFC publishes regulatory roadmap for Hong Kong's virtual asset market - Baker McKenzie InsightPlus. Staking was identified as an initiative under Pillar P (Products) of the roadmap.

7 https://apps.sfc.hk/edistributionWeb/api/circular/openAppendix?lang=EN&refNo=25EC22&appendix=0.