Fidelity introduces staking in Ethereum-ETF: a new source of income for investors
Major asset manager Fidelity has announced plans to integrate staking into its spot Ethereum fund FETH, which manages $898 million in assets. This decision gives fund holders access to additional income in the form of network validation rewards.
According to an updated registration form filed with the U.S. Securities and Exchange Commission (SEC), the fund will be able to direct up to 100% of its ETH reserves to staking. Notably, no mandatory minimum threshold has been set—flexibility in liquidity management becomes a key advantage.
How staking will work
The fund's sponsor, FD Funds Management, will delegate ETH to staking through custodians, leaving only a reserve for redemptions and operational expenses. Rewards will be distributed as follows: 85% of gross income will remain in the fund, while 15% will go toward paying the sponsor, custodians, and node operators. Blockdaemon, Figment, and Galaxy are listed as operators, while Anchorage Digital, BitGo, and Fidelity Digital Assets will handle custodial functions.
It is important to understand that staked ETH is locked for a period and cannot be used for settlements. Therefore, the fund has provided liquidity management mechanisms: it can extend the settlement periods for redemption requests or pay them out in fiat currency in case of a shortage of available coins.
Fidelity's annual management fee will be 0.25% of assets. Staking adds another source of profit for investors beyond changes in the cryptocurrency's price itself, making the product more attractive compared to competitors.
Tax context and competition
This became possible after clarifications from the U.S. Internal Revenue Service (IRS) published in November 2025. Procedure Rev. Proc. 2025-31 describes a safe harbor regime that allows qualified crypto funds to engage in staking without losing their grantor trust tax status. Funds have been given a limited time to amend their governing documents, with staking required to protect assets from malicious attacks.
Fidelity joins Grayscale and 21Shares, which have already implemented staking in their Ethereum funds. The 21Shares fund (TETH) launched staking in October 2025 via Coinbase, retaining a portion of rewards after deductions to the sponsor and custodians. BlackRock, in contrast, took a different path by issuing a separate staking product rather than modifying its existing ETF.
My analysis: The divergence of approaches in the market—layering staking onto existing funds versus launching new instruments—shows that the industry is searching for the optimal model. Implementing staking in FETH is a significant step toward institutionalizing yield in Ethereum, which could strengthen capital inflows into spot ETFs, especially amid growing interest in passive income.