TL;DR

Cboe BZX has requested SEC approval to allow staking in Fidelity’s Ethereum ETF, offering additional yields to investors.
The SEC is evaluating the proposal in a new context of increased openness toward cryptocurrency-based financial products.
If approved, it could drive competition among ETFs and impact ETH liquidity in the market.

Cboe BZX has submitted a request to the SEC for authorization to incorporate staking into Fidelity’s Ethereum ETF (FETH). The proposal aims to allow investors to earn additional rewards through the staking of the fund’s assets. If approved, this measure would introduce a new income-generating mechanism within the cryptocurrency-linked ETF market.

Staking involves locking ETH in a validator node to help secure the network in exchange for rewards. Currently, the estimated annual return rate for this activity is around 3.3% in ETH. If the SEC approves the request, FETH investors could receive these yields without needing to manage the staking process themselves.

Cboe’s proposal is not the first of its kind. In February, the exchange had already submitted a similar request for 21Shares’ Ethereum ETF. Additionally, alongside the staking petition, it has requested the listing of new XRP ETFs and modifications to redemption conditions for Fidelity’s Bitcoin and Ethereum funds. These moves aim to expand the range of crypto-based financial products within a regulated framework.

Cboe BZX Expects the SEC to Show a Real Change

The SEC’s stance on these requests remains uncertain. However, since the start of Donald Trump’s second term in January 2025, the agency has shown greater willingness to evaluate new investment structures related to crypto assets. In February, it acknowledged multiple filings linked to ETFs with options, in-kind redemptions, and alternative digital assets, suggesting a possible shift in regulatory approach.

If the SEC approves staking for FETH, other asset managers could adopt similar strategies in their ETFs, fostering competition within the sector. It could also attract more institutional investors by providing an additional income stream without direct exposure to validator node management. Furthermore, an increase in staked ETH could reduce the asset’s liquid supply and impact its price dynamics.

The SEC’s decision will be crucial for the evolution of crypto ETFs in the United States. Integrating staking into these instruments would set a precedent in the relationship between traditional finance and blockchain-native revenue models

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Filed under: News - @ March 12, 2025 2:20 pm