Fidelity introduces staking in Ethereum-ETF: a new era of yield for institutional investors
A major step for the institutional market: Fidelity has officially announced plans to add staking to its Fidelity Ethereum Fund (FETH). This decision, recorded in an updated registration filing with the U.S. Securities and Exchange Commission (SEC), fundamentally changes the product's economics. The fund, which currently manages net assets of $898 million, will be able to direct up to 100% of its Ethereum holdings into staking, with no minimum threshold set.
Staking mechanics and yield distribution
According to my analysis of the filed documents, the fund's sponsor, FD Funds Management, will delegate all Ethereum, except for reserves for redemptions and operating expenses, through a network of custodians. The key point is the distribution of gross profits: 85% of staking rewards remain in the fund, while the remaining 15% goes to pay the sponsor, custodians, and node operators. Blockdaemon, Figment, and Galaxy are named as infrastructure operators, indicating a diversified approach to validator management.
The custodial structure is also noteworthy: Anchorage Digital, BitGo, and Fidelity Digital Assets will hold the private keys for staked assets, while State Street acts as transfer agent and custodian of fiat funds. This is a multi-layered security system that minimizes the risks of a single point of failure.
Tax and regulatory changes
This innovation became possible thanks to clarifications from the U.S. Internal Revenue Service (IRS) published in November 2025. The Rev. Proc. 2025-31 procedure created a safe harbor regime that allows qualified crypto funds to engage in staking without losing their grantor trust tax status. This is a critical point: funds are required to distribute net rewards at least once per quarter, which automatically makes investor payouts regular.
It is important to note that net staking income first covers the fund's operating costs, and only the remainder is directed to quarterly cash distributions. If liquidity in ETH is insufficient, the fund may sell part of its assets to meet obligations to holders.
Competitive dynamics in the market
Fidelity joins Grayscale and 21Shares, which have already integrated staking into their Ethereum products. 21Shares launched staking in October 2025 through Coinbase Crypto Services, retaining 25% of gross revenue for the sponsor and custodians. BlackRock, by contrast, chose a different path — launching a separate staking product rather than modifying its existing ETF.
Thus, two clear strategies have emerged in the market: embedding staking into existing instruments and creating specialized products. The first model, as I see it, is more attractive for conservative investors who want to earn additional income without complicating their portfolio. However, it is important to understand: staking locks assets for an indefinite period, which could create liquidity pressure during sharp market movements. Managing this balance will be a key success factor for Fidelity in the coming quarters.