Fidelity Investments, a major player in finance managing a vast $4.5 trillion in assets, has made a significant move by updating its application for an Ethereum ETF with a focus on staking. This recent development, disclosed in an amendment filed with the U.S. Securities and Exchange Commission (SEC) on March 18, indicates Fidelity's interest in utilizing part of the fund's assets for staking through trusted providers.
Staking involves locking up a certain amount of Ethereum, in the Ethereum 2.0 smart contract to act as a validator. Validators play a crucial role in verifying transactions and enhancing the network's security. In return for their efforts, validators receive rewards in the form of additional ether. Fidelity's amendment highlights the potential revenue stream from these rewards, presenting them as advantageous additions to the ETF's income.
Fidelity aims to explore ether staking, whether through traditional validation methods or liquid staking, to tap into a potentially lucrative revenue stream. Comparisons made with Microstrategy's hypothetical scenario, had it invested in ethereum rather than BTC, highlight the significant earnings potential. For example, if Microstrategy were to stake half of its imagined ether holdings, it could potentially earn around $347 million annually. Considering Fidelity's existing spot BTC ETF reserves valued at over $9 billion, the envisioned ether ETF could reach similar scales, making staking even a fraction of these assets a profitable endeavor.
Fidelity's decision to include staking in its ETF application reflects a broader trend observed in the crypto market. Liquid staking providers like Lido $LDO and Rocket Pool $RPL saw temporary increases in response to the news, indicating market excitement. However, Fidelity's preference for centralized and institutionally-focused staking providers over tokenized governance protocols suggests a nuanced approach.
Despite Fidelity's proactive stance, analysts hold differing views on the likelihood of the SEC approving a spot Ether ETF. While some express doubt due to regulatory uncertainties and potential resistance from Congress against crypto-based ETPs, others maintain cautious optimism. The approval remains a topic of speculation, with various estimates from industry experts and financial institutions.
