Cboe BZX Seeks Approval for Staking Integration in Fidelity’s Ethereum ETF

Cboe BZX, a leading securities exchange, is pushing forward with its plans to integrate staking into Fidelity’s Ethereum exchange-traded fund (ETF). This move, outlined in a March 11 filing with U.S. regulators, seeks to enable the Fidelity Ethereum Fund (FETH) to stake its Ether (ETH) holdings, enhancing returns for investors. The proposal reflects a growing trend among cryptocurrency funds to incorporate staking mechanisms, aiming to leverage Ethereum’s proof-of-stake network to generate additional rewards.

Cboe’s proposed rule change would allow the Fidelity Ethereum Fund to stake, or delegate the staking of, all or part of the fund’s Ether holdings. This would be done through trusted staking providers. The proposal could significantly impact the fund’s ability to enhance returns for its investors.

As one of the most prominent Ethereum ETFs, the Fidelity Ethereum Fund currently manages nearly $1 billion in assets, making it a key player in the growing crypto ETF space. Staking, which involves locking up ETH to earn rewards from Ethereum’s network, has become a popular way for investors to increase their yield. At the time of the filing, staking Ether offers approximately 3.3% annual percentage yield (APR), paid in ETH, according to Staking Rewards.

Staking in Ethereum and Other Cryptos

Staking has become a widely adopted practice in the crypto world, particularly for assets like Ethereum (ETH) and Solana (SOL). This method allows cryptocurrency holders to earn passive income by participating in network validation. While Ethereum’s transition to a proof-of-stake model has been a central driver of staking’s popularity, other blockchain networks like Solana have also integrated staking mechanisms for similar benefits.

The approval of staking for Ether ETFs would open the door for more funds to incorporate staking strategies into their offerings, potentially setting a new standard for how cryptocurrency funds are managed.

Cboe’s filing is still subject to approval by the U.S. Securities and Exchange Commission (SEC). The SEC’s stance on crypto-related rule changes has evolved in recent months, and Cboe’s request to incorporate staking into ETFs is just one of many related filings under consideration.

In addition to staking, Cboe’s proposed changes also include adjustments for options trading, in-kind redemptions, and the introduction of new altcoin funds. The SEC has already acknowledged over a dozen exchange filings related to cryptocurrency ETFs, which signals a potential shift in the regulatory landscape. These filings are being closely watched by the industry as they represent a softening of the SEC’s previously stringent stance on crypto.

Broader Impact and Market Sentiment

The push for staking in Ethereum ETFs comes at a time when institutional interest in cryptocurrency is on the rise. Staking provides an added incentive for institutional investors to engage with Ethereum, offering them a more passive form of income that could drive further adoption. Moreover, Cboe’s request also aligns with broader industry trends, as exchanges and funds explore new ways to incorporate DeFi-like features into traditional financial products.

As part of the filing, Cboe has also sought permission to list other cryptocurrency ETFs, including those for XRP (XRP) from Canary and WisdomTree, as well as support for in-kind creations and redemptions for both Bitcoin and Ethereum ETFs. These moves could further expand the range of crypto assets available through traditional investment products, further blurring the lines between traditional finance and the evolving world of digital assets.

Cboe’s filing to integrate staking into Fidelity’s Ethereum ETF represents a major step forward in the evolution of cryptocurrency financial products. If approved, the rule change would allow Fidelity’s Ether ETF to offer its investors the benefits of staking rewards, potentially driving more institutional capital into Ethereum. As regulatory bodies like the SEC become more open to cryptocurrency innovation, the integration of staking could become a standard feature for more crypto-based financial products, providing a new avenue for investors to earn passive income. The coming months will be pivotal in determining how the SEC shapes the future of crypto ETFs and staking within the broader financial system.