FETH Could Stake All Its Ether Under Fidelity’s New Proposal

Fidelity has filed an amended registration statement seeking to add staking and quarterly cash distributions to the Fidelity Ethereum Fund (FETH), its spot ether ETF. The fund held $898 million in net assets and could stake as much as 100% of its ETH under normal market conditions, according to reporting on the filing.

What the Proposed Structure Includes

FETH would retain enough unstaked ETH to meet redemptions, expenses and other liquidity needs. Fidelity has not said how much of the fund’s ETH it plans to stake, and no minimum staking threshold has been set.

Staking rewards would first be used to cover fund expenses. Any remaining net rewards would be used for quarterly cash distributions to ETF investors. Fidelity also said the fund may sell ETH to generate cash for distributions if needed.

How much investors could receive in quarterly staking payouts has not been made public. That means the proposed distribution structure does not establish a specific payment amount for shareholders.

Node Operators and Reward Allocation

According to reporting on the amended registration statement, the filing names Blockdaemon, Figment and Galaxy as node operators. The report says the fund would retain 85% of gross staking rewards, while the other 15% would be split among the fund sponsor, custodians and node operators.

The proposed arrangement would add a staking component to an existing spot ether fund while preserving ETH for the fund’s operational and liquidity needs.

How FETH Compares With Other Ether Funds

Fidelity would join Grayscale and 21Shares in adding staking to existing ether funds, according to the supplied reporting. BlackRock took a different approach by launching a separate staking product rather than adding staking to an existing fund.

Bitwise also attempted to add staking to its ether ETF but withdrew that proposal, according to the same reporting. Fidelity’s proposal would therefore place FETH among the ether funds seeking to combine spot exposure with staking-related cash distributions.

What Investors Know So Far

FETH could stake up to 100% of its ETH under normal conditions, but Fidelity has not disclosed the amount it expects to stake. The fund would also maintain ETH for redemptions, expenses and other liquidity needs.

Fidelity has outlined that net staking rewards would first cover expenses before any remainder is distributed quarterly, and that ETH may be sold to fund payouts when necessary. The amount of any quarterly distribution remains undisclosed.