Fidelity Ethereum Fund Stakes Claim to Network Rewards via Rule Change
Published Date: 3/18/2025
Notice
Summary
The Cboe BZX Exchange wants to update the rules for the Fidelity Ethereum Fund so it can start staking its ether holdings. This means the fund can earn rewards by helping secure the Ethereum network, potentially boosting returns for investors. The change is under review now, and if approved, it could start soon, giving investors a new way to grow their money.
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Analyzed Economic Effects
5 provisions identified: 5 benefits, 0 costs, 0 mixed.
Fund Allowed To Stake Ether
If approved, the Fidelity Ethereum Fund may stake all or part of its ether holdings to help validate the Ethereum network and earn staking rewards. The filing notes the Ethereum network transitioned to proof-of-stake on September 15, 2022, and validators must stake a minimum of 32 ether to operate a node.
Staking Rewards Become Trust Income
The Trust would receive all or a portion of any staking rewards generated by staking activity, and those rewards may be treated as income to the Trust. That income would flow to the Trust and could affect the Fund's returns available to shareholders.
Custodian Keeps Withdrawal Keys; Retrieval Right
The filing states staking will not move Trust ether out of the Custodian's control: withdrawal private keys are controlled by the Custodian, and the Custodian can retrieve ether from validators even if validator hardware fails. This is intended to preserve Trust control over principal and rewards.
Sponsor Won't Pool or Solicit Stakes
The Sponsor will stake only ether owned by the Trust, will not pool the Trust's ether with ether from other entities, and will not solicit delegated stakes or promise specific staking returns. The Sponsor also will not advertise staking services to the public.
Sponsor Will Maintain Liquidity For Redemptions
The Sponsor states it expects to maintain sufficient liquidity in the Trust to satisfy redemptions and current liabilities even if some ether is staked. This is intended to protect shareholders who redeem shares.
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