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Fidelity adds staking to Ethereum ETF application amid mixed reception

Fidelity adds staking to Ethereum ETF application amid mixed reception

Fidelity Investments has amended its application for an Ethereum (ETH) spot exchange-traded fund (ETF) to include a staking feature, according to a regulatory filing.

The amendment was filed with the US SEC on March 18 and has stirred significant interest in the industry, but market analysts and observers have mixed feelings.  It introduces the possibility for the ETF to engage in staking activities, a core aspect of Ethereum’s functionality following its shift to a Proof of Stake (PoS) model.

The amendment comes days after US politicians wrote to the SEC to block further crypto-related ETFs due to concerns over the risk posed to retail investors.

ETF with staking

Through the proposed amendment, the ETF could allocate a portion of its holdings for staking through designated staking providers, which may include affiliates of Fidelity.

Staking involves participants locking up digital assets to support the network’s security and operations in return for rewards in the form of additional crypto. Fidelity’s move aims to explore the income-generating potential of staking within the framework of a regulated financial product.

According to the document:

“In consideration for any staking activity in which the Fund may engage, the Fund would receive certain network rewards of ether tokens, which may be treated as income to the Fund as compensation for services provided.”

The SEC has historically been highly cautious toward crypto-related financial products and, notably, rejected spot Bitcoin ETFs for years before finally relenting after a court ruled against its decisions.

The regulator has yet to decide on the Ethereum ETF applications and is expected to either approve or reject them by a May deadline. Experts were initially optimistic about the approval but have since revised the odds to roughly 35%.

Mixed feelings

The inclusion of staking in Fidelity’s ETF application raises intriguing questions about the SEC’s reception and the future regulatory landscape for…

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