Crypto news

The institutional crypto product market continues to evolve, and one of the most significant developments in recent weeks is Fidelity's decision to integrate staking into its spot bitcoin fund on Ethereum. This concerns the Fidelity Ethereum Fund (FETH), whose net asset value stands at an impressive $898 million. According to an updated registration filing submitted to the U.S. Securities and Exchange Commission (SEC), the management company FD Funds Management intends to allocate up to 100% of the fund's ETH reserves to staking, without setting a minimum threshold. This is a strategic move that fundamentally changes the economics of ETF ownership.

Staking mechanics and income distribution

A key aspect of the new model is the distribution of gross staking income. 85% of the rewards will remain within the fund itself, directly increasing its yield for share holders. The remaining 15% will be allocated to cover fees for the sponsor, custodians, and node operators. Recognized players such as Blockdaemon, Figment, and Galaxy are listed as node operators in the documentation, ensuring a high level of technical reliability. Custodial functions will be handled by Anchorage Digital, BitGo, and Fidelity Digital Assets, while State Street will take on the roles of transfer agent and cash custodian.

It is important to understand that staking involves locking up assets, which creates certain liquidity risks. In this regard, the fund has provided management mechanisms: the ability to extend settlement periods for redemption requests or fulfill obligations in fiat currency if the available ETH reserve proves insufficient. The management fee will remain at 0.25% per annum, making the product competitive, while staking becomes an additional source of income on top of price appreciation.

Tax context and market landscape

This change became possible thanks to clarifications from the U.S. Internal Revenue Service (IRS), published in November 2025 in Rev. Proc. 2025-31. The agency officially allowed qualified crypto funds to send assets into staking without losing their grantor trust tax status. At the same time, the IRS requires that the fund hold only cash and one type of digital asset, and that the staking itself be protected from network takeover by malicious participants. Net rewards first cover the fund's expenses, with the remainder distributed as quarterly cash payments — this is a mandatory requirement for such structures.

Fidelity joins Grayscale and 21Shares, which have already implemented staking in their Ethereum funds. For example, 21Shares (TETH) launched staking in October 2025 via Coinbase Crypto Services, retaining a portion of the rewards after allocating 25% of gross income to the sponsor and custodians. Meanwhile, BlackRock chose a different path, releasing a separate staking product rather than modifying its existing ETF. Thus, two clear approaches have emerged in the market: adding a layer to an existing instrument and launching a standalone product.

My analysis: Fidelity's decision is not just a technical update but a signal of market maturation. Staking in ETFs makes Ethereum investments more attractive to conservative institutional players who previously avoided the complexities of validator management. However, it is worth noting that staking yields depend on network activity and can be volatile, so investors should not view it as a guaranteed fixed coupon. In the long term, this will undoubtedly intensify competition among issuers and likely lead to lower fees and improved conditions for end holders.