Fidelity Adds Staking in its Spot Ethereum ETF Proposal
Fidelity is one of the major financial firms that have filed for spot Ethereum ETF application. Last year, the traditional finance sector joined in the trend of cryptocurrency ETFs after BlackRock filed for a spot Bitcoin ETF application. The Securities and Exchange Commission finally approved 10 Bitcoin spot ETF applications on 10th January, 2024.
After reporting record inflows in the spot Bitcoin ETFs, there is a new race to list for spot Ethereum ETFs. As per a Cointelegraph article, Fidelity recently updated its spot ETF application with an addition of staking options.
Following the updated filings, the price of LDO token increased which required the firm to stake a portion of their funds to Ethereum to generate passive income. The firm filed a 19b-4 form at the US SEC on 18th March, 2024.
Fidelity mentioned that when Ethereum ETFs are approved, the fund will stake a portion of its Ethereum reserves. The staking will be carried out through one or more trusted staking service providers.
The sponsors could stake a portion of Fund’s asset via one or more trusted staking service providers. It means that it can include an affiliate of sponsor or staking services providers as per the Fidelity filings with the regulatory agency.
Nine Financial Firms Filed for Spot Ethereum ETFs
Fidelity is yet to name a staking provider. Cointelegraph analysts have pointed out popular Ethereum staking services providers such as StakeWise, RocketPool, and Lido DAO. Lido DAO is the biggest liquid staking services provider for Ethereum.
The price of LDO token increased by 6% going from $2.48 to $2.58 after the news of Fidelity’s 19b-4 filings was confirmed.
However, there was a correction back to $2.49 shortly afterwards as per data projections from TradingView. For the last week, Lido prices have fallen by 27% following a retrace of ETH prices and various native altcoins hosted on the ecosystem.
It is important to note that Fidelity is one of the 8 fund providers that have filed for an Ethereum ETF application. The applications are still under consideration at the Securities and Exchange Commission.
On 8th February, Ark 21Shares updated the plans to stake a portion of ETH reserves. In the same manner, Franklin Templeton joined the bandwagon and filed for spot ETH ETF application.
This firm also added the option to stake a portion of Ethereum in order to generate additional income from Ethereum reserves backing the spot ETF. Since 18th November behemoths such as BlackRock, Ark Invest and Grayscale have filed for spot Ethereum ETF.
Spot Ethereum ETF Approval
Eric Balchunas, the famous spot Ethereum ETF applicant has noted that the chances of VanEck’s spot Ethereum ETF approval in May, 2024 are around 35%. Balchunas retained that the probability of the same was around 70% in January.
However, speaking with Cointelegraph, he noted that on account of radio silence from the Securities and Exchange Commission on the matter had prompted him to downgrade the likelihood.
He attributed to the projection correction to fund issuers and political backlash towards SEC chief Gary Gensler as negative signs. A latest article published by Cointelegraph confirmed that Fidelity has filed for a S-1 application with SEC for its spot ETF tracking Ethereum.
The firm intends to list the shares of the fund on the CBOE BZX exchange. The Digital Asset Services of the asset management firm is sponsored by FD Fund Management which is set to serve as ETH custodian.
Tax on Staking Payments
The filing indicates that the staking payments are treated as income for tax purposes. On this account, investors are subjected to taxable event without associated distribution from the Ethereum Trust. Meanwhile, SEC officials are set to treat the spot fund as an investment company under the 1940 Act.
The Commodity and Futures Trading Commission has classified the fund as a commodity pool as per the Commodity Exchange Act and noted that it is a money service business under US Treasury Department guidelines.
