Fidelity Investments, the prominent American asset management company, has recently submitted a revised amendment to its Ethereum Exchange-Traded Fund (ETF) application, incorporating a staking component.
In the race to secure approval for a spot Ethereum ETF, Fidelity has joined other applicants in seeking permission to allocate the fund’s assets to staking. The company filed the amendment, known as a Form 19b-4, with the Securities and Exchange Commission (SEC), joining the likes of Grayscale Investments, who have also 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 inclusion of staking in the ETF is a response to Ethereum’s transition to the Proof-of-Stake (PoS) consensus mechanism through The Merge. Staking has become a popular way for investors to earn passive income while acting as validators. The Fidelity Ethereum Fund will primarily invest in Ethereum cryptocurrency.
The recent filing seeks permission to allocate investments to staking pools provided by “one or more trusted staking providers, which may include an affiliate of the Sponsor.”
Ethereum staking has become a significant venture, with the Lido protocol currently boasting a Total Value Locked (TVL) of $32.24 billion, according to data from DeFiLlama. By engaging in staking, Fidelity could potentially earn an additional 3.4% Annual Percentage Rate (APR) if it partners with Lido, for example. The reward would be in the form of Ether tokens.
The Fidelity filing states, “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.”
As the May 23 deadline for VanEck’s ETF application approaches, there is growing speculation about whether the SEC will approve the spot Ethereum ETF for trading, as it did for Bitcoin in January.
While market experts hold differing opinions, many are optimistic based on previous comments from SEC Commissioner Hester Peirce. She has indicated that the regulator will avoid repeating the mistakes made in the lead-up to approving Bitcoin ETFs.
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