CBOE Proposes Staking for Fidelity's Ethereum ETF

The Chicago Board Options Exchange (CBOE) has filed a proposal with the U.S. Securities and Exchange Commission (SEC) to amend Fidelity Investments' Ethereum ETF, aiming to introduce staking capabilities. This move, if approved, would allow investors to earn additional rewards by participating in staking activities, a process where cryptocurrency holdings are locked up to support the network and earn returns.

The proposal seeks to eliminate a clause that currently bars staking in the ETF. According to the filing, CBOE BZX Exchange is requesting the SEC to approve staking functionalities under specific guidelines. The sponsor of the ETF would be responsible for staking the Ethereum (ETH) through trusted staking providers, with the custodian controlling the private keys for the withdrawal address. This amendment is backed by statutory provisions and aims to help the Trust better track the returns associated with holding ETH.

The filing also outlines proposed rules for ETH staking, ensuring that the ETF's sponsor maintains sufficient liquidity for redemption purposes and that staking activities do not violate SEC rules on securities. The sponsor will stake ETH to preserve the Trust’s assets and generate returns for shareholders. The SEC has 45 days to respond to the proposal, and enthusiasts are optimistic about the potential approval given the recent changing stance of the SEC on cryptocurrency regulations.

This development marks a significant shift in the regulatory landscape for cryptocurrency-based financial products. Staking has been a contentious issue, but recent policy changes and the SEC's dismissal of the Kraken case indicate a more favorable regulatory environment. The potential approval of staking in Fidelity's Ethereum ETF could attract more investors by providing an additional revenue stream through staking rewards, further integrating cryptocurrencies into the traditional financial system.