- Fidelity filed an amended SEC registration to add staking to FETH
- FETH could stake up to 100% of its ETH and pay quarterly cash
- Staking can’t start until the SEC declares the filing effective
Fidelity Investments is seeking to add staking to its $898 million Fidelity Ethereum Fund (FETH), potentially allowing the fund to stake as much as 100% of its Ethereum holdings and distribute staking-related proceeds to investors.
The asset manager filed an amended registration statement with the U.S. Securities and Exchange Commission (SEC) on Aug. 11 proposing to add staking and quarterly cash distributions to FETH.
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The proposal is not yet effective, and Fidelity cannot begin staking through the fund unless the SEC declares the amended registration statement effective.
How FETH’s Staking Would Work
Under the proposed structure, FETH could stake up to 100% of its ETH under normal market conditions. The fund would not be required to stake a minimum amount and could retain some ETH to meet redemption requests, cover expenses and maintain liquidity.
Of the gross staking rewards generated by the fund, 85% would go to FETH. The remaining 15% would be allocated among the fund’s sponsor, custodians and node operators.
Fidelity has identified Blockdaemon, Figment and Galaxy Digital Trading Cayman as the intended node operators that will run the validator infrastructure.
The 85% allocated to the fund would not be paid directly to shareholders. The proceeds would first be used to cover the fund’s operating expenses, with any remaining amount distributed to investors in cash on a quarterly basis, subject to the applicable tax treatment for the fund’s grantor-trust structure.
The distributions would not be guaranteed. If the fund does not have sufficient cash to make a distribution, it could sell ETH to raise the necessary funds.
Who Would Custody the Staked ETH?
Fidelity has entered into new custody arrangements with Anchorage Digital Bank and BitGo Bank & Trust for the fund’s staked assets.
The custodians would hold the private keys associated with the assets, while the designated node operators would handle validator operations. The arrangement separates custody of the assets from the operation of the validators.
Fidelity’s ability to begin staking would remain subject to the SEC declaring the amended registration statement effective.
