Fidelity is preparing to add staking and quarterly cash distributions to its Fidelity Ethereum Fund (FETH), according to CoinDesk on Aug. 12. A revised registration statement shows the fund may stake as much as 100% of its Ether holdings, with no minimum requirement, while keeping part of its ETH inventory available for redemptions and liquidity needs.
FETH filing outlines staking and quarterly payouts
Under the proposed structure, Fidelity would retain 85% of gross staking rewards. The remaining 15% would be allocated to the fund sponsor, custodian, and node operators. The filing lists Blockdaemon, Figment, and Galaxy as node operators.
Net staking income would first be used to cover fund operating expenses, with any remainder paid out as quarterly cash distributions. Fidelity also said it may sell part of its ETH holdings to raise cash for distributions.
FETH ranks fourth among U.S. spot Ether ETFs
FETH is one of the larger products in the U.S. spot Ether ETF market. CoinGlass data cited in the report shows the fund had about $1.34 billion in assets under management as of mid-August, placing it fourth in the category.
The three products ahead of it were BlackRock’s iShares Ethereum Trust ETF (ETHA) with about $7.21 billion, Grayscale Ethereum Staking ETF (ETHE) with about $3.46 billion, and Grayscale Ethereum Mini ETF (ETH) with about $1.27 billion.
Large issuers have already moved into staking
Fidelity would not be the first issuer to pursue this model. Grayscale and 21Shares have already added staking functions to their Ether funds, while BlackRock chose to launch a separate staking product, the iShares Staked Ethereum Trust ETF (ETHB).
According to Grayscale’s official data, ETHE currently has a gross staking yield of 2.75%, a net staking yield of 2.11%, a staking rate of about 80.51%, and cumulative net dollar rewards of about $27.3 million.
Among products that have already made distributions, ETHE’s latest payout was about $0.0217 per share, while ETHB distributed about $0.0325 per share. Distribution schedules are generally monthly or at least quarterly. The Grayscale ETH mini trust has a net staking yield of about 2.59%, and BlackRock’s ETHB has a 30-day staking reward rate of about 1.84%.
Net ETF staking yield usually trails on-chain yield
Data from Ethereum’s official website shows around 41.85 million ETH are currently staked, representing 33% of total supply, with an annualized staking yield of about 2.6%.
ETF investors usually receive less than that level on a net basis because staking service providers take a share, management fees apply, and funds typically stake only part of their assets to keep a liquidity buffer.
ETHE offers one example. Its gross yield of 2.75% falls to 2.11% net after roughly 23% is taken by the sponsor and custody arrangement. Under Fidelity’s plan, 85% of gross rewards would remain available within the fund structure, meaning the end investor’s actual net yield would still depend on fund fees, the staking ratio, and node operator performance. The report said that net yield is expected to land in a 1.5% to 2% range.
FETH has competed on fees and self-custody
FETH was established in October 2023 and listed on Cboe BZX in July 2024 as one of the first spot Ether ETFs in the United States. The fund charges a 0.25% fee, and custody is handled by Fidelity Digital Assets.
Since listing, the fund has competed on a relatively low fee and its self-custody setup. If staking and cash distributions are formally added, the product would move beyond simple spot Ether exposure and offer an extra source of return.
Smaller Ether ETFs may face a tougher fight
Fidelity’s move could intensify the concentration already visible in the Ether ETF market. Products that already offer staking-linked income, including those from Grayscale, 21Shares, and BlackRock, are among the category leaders and already benefit from brand recognition and deeper liquidity.
That added yield feature could make those funds more attractive to investors and may accelerate outflows from smaller ETFs that do not provide staking income.
A similar pattern has already appeared in the Bitcoin ETF market. Hashdex’s Bitcoin ETF DEFI, which had struggled with low assets for an extended period, held about $14.7 million before shutting down and announced liquidation in August this year, becoming the first U.S. spot Bitcoin ETF to close.
CoinGlass data shows there are currently 12 Ether ETFs with combined assets of about $13.72 billion. The top five funds account for roughly $13.48 billion, or 98.25% of the market. With most market share already concentrated in the largest products, smaller funds may come under greater pressure if they cannot offer a differentiated yield feature.