Fidelity’s Latest Move: Injecting Staking into Its Ethereum ETF Proposal!

Last Updated on March 19, 2024

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Key Takeaways:

  • Fidelity has proposed to the SEC to incorporate staking into its Ethereum ETF, aiming to generate additional earnings for investors.
  • The move led to a temporary 6% increase in Lido DAO’s value, although it soon reverted amid a downturn in Ether prices.
  • With a May 23 deadline looming, the odds of Ether ETF approval have been adjusted to 35% by Bloomberg’s ETF analyst, reflecting SEC hesitancy and political scrutiny.

Fidelity’s introduction of staking into its spot Ether ETF proposal sent ripples through the crypto market, briefly buoying the price of LDO. The financial behemoth has proposed to the U.S. Securities and Exchange Commission (SEC) that it be allowed to stake a part of the ETF’s Ethereum holdings.

This move aims to yield additional earnings for investors, though the exact proportion of assets to be staked remains under wraps. Fidelity’s strategy involves leveraging reputable staking providers, possibly including an affiliate.

Amendment for staking
Amendment for staking. Source:

The absence of a named staking provider leaves speculation open, with prominent players like Lido DAO, RocketPool, and StakeWise in the market. Lido DAO, a major Ethereum staking entity, saw its value momentarily surge by 6% following the announcement, although it quickly reverted, mirroring a broader downturn in Ether and related tokens.

Fidelity stands among eight contenders eagerly waiting for the SEC’s green light on their Ether ETF applications. This list was recently expanded to include Ark 21Shares and Franklin Templeton, both expressing intentions to employ staking for additional revenue.

SEC form 19b-4
SEC form 19b-4 for amendment requirements. Source:

With a critical deadline approaching on May 23, all eyes are on the SEC, which faces pressure from various fronts, including lawmakers urging a cautious approach to crypto ETF approvals.

Bloomberg’s ETF analyst, Eric Balchunas, has adjusted the odds of an Ether ETF materialization by the deadline to 35%, a significant drop from a previously more optimistic outlook. This revision stems from a perceived hesitancy from the SEC and growing political scrutiny of its chairman, underscoring the complex landscape crypto ETF proponents navigate in their quest for regulatory approval.

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