Fidelity is preparing to introduce Ethereum staking and quarterly cash distributions for its spot Ethereum ETF, FETH, which held $898.71 million in net assets as of August 11. Staking has not yet started, and the firm warns that funding cash distributions could reduce the fund’s ETH exposure.
Fidelity is moving forward with plans to enable Ethereum staking for its spot exchange-traded fund, FETH. In a filing on August 7, the firm stated it had amended trust and sponsor agreements for FETH to allow staking.
Custody agreements have been drawn up with Anchorage Digital and BitGo, but Fidelity Digital Assets will continue as the fund’s custodian. The amended registration statement indicates that FETH will stake up to 100% of its ETH, though it is not committed to any minimum amount.
As custodians, Fidelity will keep hold of the private keys, and its chosen operators will run Ethereum validators. Proposed node operators include Blockdaemon, Figment, and Galaxy Digital Trading Cayman.
Under the plan, 85% of staking rewards will go to FETH while 15% will go to the sponsor, custodians, node operators, and other service providers. Staking will start only after the amended registration statement becomes effective.
As of August 11, FETH had net assets of $898.71 million and cumulative net inflows of $2.12 billion, according to SoSoValue data. Data shows daily flows remain uneven, and the fund recorded a $2.33 million net outflow alongside $19.64 million in trading volume.
The firm plans to convert eligible staking income into fiat and distribute it to shareholders quarterly, though these payments are not guaranteed. Fidelity states that selling rewards and current holdings of ETH may also be used to fund distributions, which would likely reduce FETH’s exposure to ETH and affect its net asset value and share price.
Staking also introduces more risks, such as slashing, validator failure, or withdrawal delays.
