Fidelity has filed to modify its $898.71 million Ethereum ETF to include staking and quarterly cash distributions, marking a significant step in the fund's evolution. The filing represents Fidelity's formal application to the SEC for approval to implement the new staking strategy, which would allow the fund to stake up to 100% of its ETH holdings and pass related proceeds to investors through quarterly cash payouts. As per the SEC filing submitted on August 11, Fidelity plans to begin staking as soon as practicable after the prospectus takes effect, with the trust allowed to earn rewards from ether already held by the trust. In a subsequent Form 8-K filing on August 7, Fidelity stated it had amended trust and sponsor agreements for FETH to allow staking, with the amended registration statement becoming effective.
Under the proposed structure, Fidelity would retain 85% of gross staking rewards, while the remaining 15% would go to the fund sponsor, custodians and node operators. The fund would maintain some ETH available for redemptions, expenses and other liquidity needs while implementing the new staking strategy. The filing defines normal conditions as periods when Ethereum is operating without material disruption, redemption activity remains within expected ranges, and no extraordinary event requires Fidelity to hold additional ETH outside staking. Fidelity named Blockdaemon, Figment and Galaxy Digital Trading Cayman as its intended node operators, with allocation among them depending on security practices, operating experience, technology and the concentration of the fund's ETH with individual operators. Custody agreements have been drawn up with Anchorage Digital and BitGo, though Fidelity Digital Assets will continue its existing role as the fund's custodian, with Fidelity retaining hold of the private keys.
As of August 11, FETH has net assets of $898.71 million and cumulative net inflows of $2.12 billion, according to SoSoValue data. However, the fund recorded a $2.33 million net outflow alongside $19.64 million in trading volume, indicating daily flows remain uneven. The amended registration statement indicates that FETH will stake up to 100% of its ETH, but is not committed to any minimum amount. Fidelity plans to convert eligible staking income into fiat and distribute it to shareholders quarterly, though these payments are not guaranteed. The firm may also sell some ETH to raise cash for payouts, as reported by the amended registration statement. This would likely reduce FETH's exposure to ETH and affect its Net Asset Value and share price, while staking introduces additional risks such as slashing, validator failure, or withdrawal delays.
