Fidelity adds staking to Ethereum ETF application amid mixed reception Fidelity adds staking to Ethereum ETF application amid mixed reception
Experts believe the amendment will further complicate the chances of Ethereum ETFs securing approval in May.
2 min read
Updated: Mar. 18, 2024 at 10:44 pm UTC
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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 digital assets. The move has caused mixed reactions within the industry but failed to shift sentiment toward optimism.
Bloomberg analyst James Seyffart remains skeptical about the SEC’s willingness to greenlight an Ethereum and said the amendment has not changed the base case for approval, which remains negative.
He added:
“To be clear — I don’t think they *should* be denied. But at this point I think they will be.”
Meanwhile, Zack Guzmán, a former Yahoo Finance reporter, suggested that Fidelity’s decision to add staking to its ETF application could either be a strategic move to align more closely with the SEC’s expectations or a potential point of contention that might complicate approval.
As the SEC reviews Fidelity’s amended Ethereum ETF application, the decision could set a precedent for future crypto ETFs, especially those seeking to incorporate staking or other native blockchain functionalities.
The outcome will be closely watched by investors, regulatory bodies, and the digital assets community, as it could mark a pivotal moment in integrating traditional financial products with the innovative features of digital assets.
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Assad Jafri
AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.
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