Emma Nelson 
After almost a year since its initial launch, Fidelity’s Ethereum Exchange-Traded Fund (ETF) may soon include staking capabilities for investors, according to a new filing with the U.S. Securities and Exchange Commission (SEC). The proposal, submitted by the Cboe BZX Exchange, seeks to modify the current rules governing Fidelity’s Ethereum ETF, allowing the integration of Ethereum (ETH) staking, which would enable investors to earn additional rewards through their participation in the staking process.
ETF
Cboe BZX Exchange Seeks Approval for ETH Staking in Fidelity’s Ethereum ETF
Cboe BZX Exchange has formally submitted a proposal to the SEC, requesting the inclusion of Ethereum staking within Fidelity’s Ethereum ETF. The goal of the proposal is to allow investors to benefit from staking rewards, a process by which Ethereum holders can lock their coins in the blockchain’s proof-of-stake mechanism to help secure the network and earn staking rewards in return.
A closer look at the filing reveals that Cboe BZX is pushing to remove a previous clause that specifically prevents the ETF from participating in Ethereum staking. The new proposal indicates that the ETF sponsor could now stake all or part of the Trust’s Ether holdings through reputable and trusted staking providers. This move would give investors the opportunity to gain returns not only from the price appreciation of Ether but also from staking activities.
Cboe’s Justification for the Move and Regulatory Backing
Cboe BZX maintains that the proposed staking activities are fully supported by relevant statutes and regulations and are designed to help the fund more accurately track the returns associated with holding Ether. This proposal comes in the wake of Ethereum’s transition to a Proof-of-Stake (PoS) consensus mechanism in 2022, which introduced staking as a key feature for securing the blockchain and generating rewards.
The ETF’s sponsor, according to the filing, pledges to ensure sufficient liquidity within the fund to maintain its ability to redeem shares. Additionally, the filing guarantees that staking activities will be conducted in full compliance with the SEC’s existing rules on securities, specifically avoiding the commingling of funds between different types of assets and ensuring transparency in staking operations.
The sponsor will handle ETH staking with the goal of preserving the Trust’s assets and generating returns for its shareholders. According to the filing, a custodian will oversee the private keys associated with the withdrawal address to ensure that the assets are managed securely.
The SEC’s Role and the Anticipated Timeline for Approval
The SEC now has a 45-day window to respond to the proposal, with many industry observers hopeful that this new, forward-thinking approach by the SEC will result in approval. There are indications that the SEC may be softening its stance on certain cryptocurrency-related matters, as evidenced by its recent dismissal of the Kraken case and the declaration that memecoins are not classified as securities. These developments suggest that the regulatory environment may be evolving, potentially paving the way for more crypto-based financial products to be approved by the SEC.
Despite the optimism surrounding the potential approval of the staking feature, the price of Ethereum has not reacted significantly to the news. Currently trading well under $2,000, Ethereum remains volatile. While whale activity in the market has been increasing, the possibility of Ethereum falling to $1,000 is still seen as a grim reality by some analysts, casting a shadow over the overall bullish sentiment.
