Fidelity, Cboe Seek SEC Approval for Ethereum ETF Staking, Offering 3.3% APR

Cboe BZX Exchange has submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to amend the fidelity Ethereum Fund, allowing for the staking of ether held by the trust. This move comes as new regulatory norms emerge in the U.S., with Fidelity seeking to incorporate staking into its spot Ethereum ETF. The proposal, filed on March 11, aims to introduce staking as a feature, enabling investors to earn additional rewards from their holdings in the ETF. This development marks a reversal of the previous decision to exclude staking from the fund, indicating a strategic shift by Fidelity and Cboe to capitalize on the growing interest in staking and passive income opportunities within the crypto market.

The filing of the 19b-4 form with the SEC underscores the exchange's commitment to adapting to evolving regulatory landscapes and enhancing the value proposition for investors in the Fidelity Ethereum Fund. The proposed rule change would allow Fidelity Ethereum Fund (FETH) to “stake, or cause to be staked, all or a portion of the Trust’s ether through one or more trusted staking providers.” This initiative is part of Cboe’s broader strategy to support staking for Ether funds traded on its U.S. exchange, following a similar request in February for the 21Shares Core Ethereum ETF.

Staking Ether involves posting ETH as collateral with a validator in exchange for rewards, which currently yield approximately 3.3% APR, denominated in ETH. This mechanism is not unique to Ether, as other popular cryptocurrencies, including Solana, also feature staking mechanisms. The incorporation of staking into the Fidelity Ethereum Fund is expected to enhance returns for investors, making the ETF more attractive in the competitive crypto market.

The SEC must still approve Cboe’s proposed rule changes before staking can commence. In February, the SEC acknowledged more than a dozen exchange filings related to cryptocurrency ETFs, highlighting a shift in the agency's stance on crypto since the beginning of the year. The filings, submitted by Cboe and other exchanges, addressed proposed rule changes concerning options, in-kind redemptions, and new types of altcoin funds.

Cboe has also sought permission to list Canary and WisdomTree’s proposed XRP ETFs and support in