Fidelity is set to enhance its Fidelity Ethereum Fund (FETH), which currently manages $898 million in assets, by incorporating staking and quarterly cash distributions.
The fund plans to retain 85% of the gross staking rewards, with the remaining 15% allocated to service providers. Under typical circumstances, FETH could stake nearly all of its ether, although Fidelity has not defined a minimum staking amount, as per an amended registration statement. The fund will maintain a portion of ETH for redemptions, expenses, and liquidity requirements.
This initiative follows a IRS safe harbor announcement from November 2025, which permits eligible crypto trusts to stake their assets without forfeiting their grantor-trust tax status. Fidelity joins Grayscale and 21Shares in integrating staking into their ether funds. In contrast, BlackRock has opted to create a distinct staking product.
Fidelity will keep 85% of the gross staking rewards, while 15% will be distributed among the fund sponsor, custodians, and node operators, with Blockdaemon, Figment, and Galaxy identified as the trust’s node operators.
The net staking rewards will first cover the fund's expenses before being allocated for quarterly cash distributions, as required by IRS regulations. Additionally, Fidelity indicated that the fund might liquidate some ETH to generate cash for these payouts.