• Cboe files with SEC to allow staking in Fidelity Ethereum ETF.
• Proposal could boost FETH by adding staking rewards for investors.
• Other firms, including Grayscale, seek staking in Ethereum ETFs.

Cboe BZX Exchange has filed a proposal with the U.S. Securities and Exchange Commission (SEC) to allow staking for the Fidelity Ethereum Fund. The proposal seeks to enable the fund to stake its Ethereum holdings, which could enhance returns for investors. This move would make Fidelity’s Ethereum Fund one of the first U.S. ETFs to incorporate staking.

Staking involves locking up cryptocurrency to support a blockchain’s operation, specifically Ethereum’s proof-of-stake system. Validators who stake tokens help secure the network and process transactions as well as earn rewards in the form of additional tokens. The move allows investors to earn staking rewards without the technical complexities.

The SEC’s approval of this proposal would position Fidelity’s Ethereum Fund, FETH, as a unique offering in the U.S. market. Ethereum’s price reacted positively to the announcement, with a slight rise to $1,960. If approved, this staking integration could attract more investors seeking passive returns from Ethereum’s growing ecosystem.

Currently, the FETH ETF is facing struggles due to a decline in Ether’s value amid the broader crypto market downturn. As the price of Ethereum dropped, the ETF’s assets under management also shrank. Nevertheless, Fidelity’s fund remains one of the largest Ethereum ETFs, ranking third in the market.

The proposed rule change, submitted under SEC’s 19b-4 form, would allow the Fidelity fund to stake its Ether holdings. The fund would collaborate with trusted staking providers to facilitate this process. According to the filing, any rewards from staking would be treated as income.

This development follows the SEC’s approval of spot Ethereum ETFs, which allowed firms like BlackRock and Grayscale to offer Ethereum-backed ETFs. However, staking was excluded from these initial approvals to help the ETFs to gain regulatory approval. Additionally, firms like Grayscale and 21Shares are also seeking to incorporate staking into their Ethereum ETFs.

If the SEC approves Cboe’s proposal, it could signal a shift in how Ethereum ETFs operate and provide a competitive edge to Fidelity’s fund. The addition of staking rewards could make Ethereum ETFs more attractive to both institutional and retail investors. As the crypto market continues to evolve, such moves may enhance the overall market participation.

Bitcoin Suisse had previously predicted that Ethereum-staking ETFs would outperform Bitcoin-based ETFs. The firm also forecasted that financial giants would launch institutional roll ups on Ethereum and predicted continued growth for the cryptocurrency sector in 2025. This proposal by Cboe BZX Exchange highlights the growing potential of Ethereum-based investment vehicles and their ability to attract institutional interest.