Fidelity seeks SEC nod to unlock staking on its Ethereum ETF – Could this boost crypto yields?

• Fidelity is seeking the SEC’s permission for staking on its ETF ETFs
• ETF staking could offer an extra 3% yield to investors. 

Fidelity, through the CBOE exchange, has filed an application with the SEC, seeking permission on staking provision for its Ethereum [ETH] ETF product. This, after a similar application by 21Shares and Grayscale in February, marking growing optimism around potential staking features in U.S spot ETH ETFs. 

The products launched last summer now have about $7 billion in total net assets just locked in custody accounts.

These assets could generate extra yield if staked – Delegating part of ETH to validators to secure the blockchain network and reward them with additional tokens. 

ETH staking rewards

Even Bitwise is mulling a similar filing in the U.S., stating that it would increase investor returns. In a recent Bloomberg interview, Matt Hougan, Bitwise CEO, stated, 

“ETPs should stake. We’ve seen in Europe that staking ETPs work and help increase investor returns and boost network security.”

For his part, Etherealize founder Vivek Raman claimed that lack of staking “dampened” ETH ETF adoption. According to the exec, ETH ETF staking, 

“Can open up more money, it can open up a differentiated narrative around Ethereum.”

According to Staking Rewards, staked ETH was attracting about 3.7% annualized returns as of press time. These extra rewards can be enjoyed by investors and drive demand for the ETH ETF. 

Right now, the only yield that asset managers can capitalize on through the ETH ETFs is the CME Ethereum basis trade. It involves buying spot ETH ETF and opening a short on the CME Futures to pocket the price difference (yield or basis). 

During last November’s uptrend, the CME ETH basis trade yielded nearly 20%. That would be a whopping 23% yield if staking rewards were included. 

However, due to broader weak sentiment, the CME basis trade had dropped to about 6% at press time. And yet, this could collectively offer about a 9% yield for ETH ETF investors if staking returns are factored in.  

Meanwhile, ETH was valued at $1.88k at the time of writing, down 54% from its record highs of $4k. It remains to be seen whether ETF staking will boost the altcoin’s value or not.