Fidelity Moves to Turn Its $898M Ethereum ETF Into a Yield Asset
Fidelity plans to introduce staking to its $898 million Fidelity Ethereum Fund (FETH), a change that could narrow one of the biggest gaps between holding an Ethereum ETF and owning ETH directly.
Summary:
- Fidelity plans to let FETH stake as much as 100% of its ETH under normal conditions.
- The fund would retain 85% of gross staking rewards after a 15% staking fee.
- Remaining net rewards would support cash distributions at least quarterly.
- Fidelity has added Anchorage Digital and BitGo to support custody and staking operations.
Retail investors would gain access to staking-derived cash distributions through a conventional brokerage product without managing private keys or validator infrastructure, while institutions could combine regulated custody, exchange-traded liquidity and part of Ethereum’s native yield within a single vehicle. According to the official filing, FETH could stake as much as 100% of its ETH under normal conditions and retain 85% of gross staking rewards before other fund expenses.
Fidelity is changing the economics of holding ETH through an ETF
When FETH launched in July 2024, its investment proposition was relatively simple. The trust held ether and sought to track its market price after fees.
That structure created a persistent return gap versus directly holding and staking ETH. An investor who held ether independently could participate in network validation and earn staking rewards, while an investor holding a non-staking ETF could not.
Fidelity’s proposed structure narrows that difference.
FETH has no minimum staking allocation, meaning Fidelity can adjust participation according to liquidity requirements. Under normal conditions, as much as the entire ETH position could theoretically be committed to staking, although some ether would need to remain available for share redemptions, expenses, distributions and other operational needs.
The fund currently has about $898 million in net assets. That makes the filing significant beyond FETH itself: staking is moving from a feature associated largely with direct crypto ownership into the operating model of large, regulated U.S. investment products.
Investors will not receive the full staking yield
FETH would retain 85% of gross staking rewards, while the remaining 15% would serve as a staking fee shared among the sponsor, custodians, node operators and potentially other parties involved in running the program.
The 85% retained by the trust is also not necessarily the amount shareholders ultimately receive in cash.
Net staking rewards would first be available to meet applicable fund expenses and liabilities. The remaining proceeds can then fund shareholder distributions, redemption needs or additional staking. Fidelity plans to make cash distributions of net staking income at least quarterly.
That distinction matters for comparing FETH with directly staked ether. Investors gain the convenience of an exchange-traded security, institutional custody and simplified access, but part of the raw network yield is exchanged for the infrastructure needed to provide that exposure inside a regulated fund.
FETH Staking Structure
The quarterly cash payout changes how staking reaches shareholders
Fidelity is not proposing to distribute ETH directly to investors.
Instead, staking rewards earned in ether would ultimately be converted into cash for distributions. Fidelity’s disclosures also allow the trust to sell ETH when necessary to raise cash for those payments.
This creates a very different investor experience from self-staking.
A direct ETH holder receives additional ether and remains responsible for custody, validator selection or staking-provider exposure, as well as the associated tax treatment. An FETH shareholder would continue holding an exchange-traded security while receiving periodic cash attributable to the trust’s net staking income.
The format effectively translates a blockchain-native reward mechanism into something closer to the income distribution investors already encounter in traditional funds.
There is still no fixed dividend. Ethereum staking rewards fluctuate with validator participation, network conditions and other factors, while fees and expenses reduce what ultimately reaches shareholders. Fidelity therefore has not promised a specific yield.
Fidelity has built a multi-custodian staking architecture
The filing also reveals how much operational infrastructure sits behind an ETF staking program.
On August 7, FETH entered custody arrangements with Anchorage Digital Bank and BitGo, adding them alongside Fidelity’s existing digital asset custody setup. An SEC-filed Anchorage agreement specifically lists the Fidelity Ethereum Fund and contains a staking services addendum.
The proposed staking structure also names Blockdaemon, Figment and Galaxy among the node operators expected to support Ethereum validation. Custodians retain control over the private keys while node operators provide the validator infrastructure.
That separation is important. Fidelity is not simply transferring hundreds of millions of dollars of ETH to independent validators. The custody arrangement is designed to preserve institutional control of the assets while third parties perform the technical work required to validate Ethereum transactions.
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It also introduces risks that did not exist when FETH simply held unstaked ether. Validators can incur penalties for downtime or improper behavior, while staked ETH may temporarily be less liquid because exiting validators and withdrawing assets takes time. Ethereum’s own staking rules therefore create a tension between maximizing yield and preserving enough liquid ETH to service ETF redemptions.
A tax change made staking inside spot ETH funds more practical
An IRS safe harbor issued in November 2025 gave qualifying crypto grantor trusts a route to participate in staking without automatically losing their grantor-trust tax treatment. That removed a major obstacle that had discouraged the original generation of spot Ethereum ETFs from staking their assets.
The result has been a rapid change in product design.
Grayscale already stakes ETH and recently amended its structure to require net cash proceeds from staking rewards to be distributed no less frequently than quarterly. BlackRock took another route by launching a separate iShares Staked Ethereum Trust ETF, which reported more than 153,000 ETH staked as of March 31.
Fidelity is choosing to upgrade its existing flagship ETH product rather than force investors to move into a separate staking fund.
Staking changes the competition between Ethereum ETFs
That decision could reshape how investors compare spot Ethereum products.
Spot ETH ETF Staking Comparison
When every fund simply held ETH, differentiation largely came down to fees, liquidity, custody arrangements, tracking performance and issuer reputation. Staking adds another variable: how efficiently each manager converts Ethereum’s native yield into shareholder returns.
A fund staking a larger proportion of its holdings can potentially capture more network rewards, but it must also manage greater liquidity exposure. A lower staking fee leaves more gross rewards inside the trust, while a more diversified validator setup can reduce concentration risk.
For FETH shareholders, the relevant number will therefore not be the 100% maximum allocation alone. The more useful figures will be the actual percentage of ETH staked, realized staking yield, validator losses if any, operating deductions and cash distributed per share.
Fidelity’s amended structure has created the framework for all of those metrics. Once staking begins, they will provide a much better measure of whether FETH can close the return gap between owning an Ethereum ETF and holding productive ETH directly.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Alexander Zdravkov
Reporter at CoinsPress
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 10,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
