The Rise of Staking in Ethereum ETFs
The Cboe BZX Exchange has recently filed a request with the U.S. Securities and Exchange Commission (SEC) to allow staking for the Fidelity Ethereum Fund (FETH), as disclosed in a March 11 filing.
What is Staking?
Staking involves locking ETH to secure the Ethereum network while generating rewards. If approved, a staked ETH ETF could provide investors with additional income beyond traditional spot Ethereum ETFs.
Advantages of Staking
The filing highlights the benefits of staking, including enhancing investor returns, simplifying the fund’s creation and redemption process, and improving overall efficiency.
According to the filing:
“Allowing the Trust to stake its ether would benefit investors and help the Trust to better track the returns associated with holding ether. This would improve the creation and redemption process for both authorized participants and the Trust, increase efficiency, and ultimately benefit the end investors in the Trust.”
Strict Staking Guidelines
- Only the ETH held by the fund will be staked, with no pooling of assets from external entities.
- The sponsor will not advertise staking services, guarantee returns, or solicit staked assets from third parties.
- Staking will protect the fund’s assets, contribute to network security, and generate shareholder returns.
Industry players have been advocating for staking integration in ETFs, emphasizing the benefits of allowing investors to leverage network-native features while strengthening blockchain security.
The Argument for Staking
In a recent submission to the SEC, Solana-focused infrastructure company Jito Labs and Multicoin Capital highlighted how staking in exchange-traded products (ETPs) could offer structural advantages and attract investor interest.
“Restricting staking in crypto asset ETPs harms (i) investors, by crippling the productivity of the underlying asset and depriving investors of potential returns, and (ii) network security by preventing a significant portion of an asset’s circulating supply from being staked.”
Current Market Challenges
As Ethereum ETFs experience a wave of investor withdrawals, with outflows exceeding $140 million in the past four days, the proposal for staking integration comes at a critical time for the market.
