Fidelity Investments, a prominent American asset management company, has submitted a revised proposal for its Ethereum Exchange-Traded Fund (ETF) that includes a staking component.
In the race to launch a spot Ethereum ETF, Fidelity has joined other applicants in seeking approval to allocate the fund’s assets to staking. Fidelity filed the amendment, known as Form 19b-4, with the Securities and Exchange Commission (SEC), following in the footsteps of companies like Grayscale Investments that have made similar filings.
If approved by the SEC, the Fidelity Ethereum Fund, which falls under the “BZX Rule Commodity-Based Trust Shares,” will be available for trading.
The Incentive for Ethereum Staking
Since Ethereum’s transition to Proof-of-Stake (PoS) with The Merge, staking has become a popular method for investors to earn passive income while serving as validators. Fidelity Investments’ push for a spot Ethereum ETF will primarily invest in the cryptocurrency.
The recent filing seeks permission to expand the investment into staking pools provided by “one or more trusted staking providers, which may include an affiliate of the Sponsor (‘Staking Providers’).”
Ethereum staking has become a significant venture, with Lido, a leading protocol, currently boasting $32.24 billion in Total Value Locked (TVL), according to data from DeFiLlama. By participating in staking, Fidelity could potentially earn an additional 3.4% Annual Percentage Rate (APR) if it partners with Lido, for example. This reward would be in the form of Ether tokens.
“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 Fidelity filing states.
Chances of Approval for a Spot Ethereum ETF
As the May 23 deadline for VanEck’s ETF application approaches, there is growing speculation about whether the SEC will grant approval for trading, just as it did for Bitcoin ETFs in January.
Despite differing opinions among market experts, many are hopeful based on encouraging remarks made by SEC Commissioner Hester Peirce. According to her, the regulatory agency will not repeat the same mistakes it made leading up to the approval of Bitcoin ETFs.
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