Fidelity Allows Ethereum, Solana ETFs to Stake Up to 100% of Holdings, With 85% of Rewards Going to Funds

Fidelity has set up a structure that allows its Ethereum and Solana exchange-traded products to stake as much as 100% of their crypto holdings.

CryptoSlate reported on Aug. 24 that the Fidelity Ethereum Fund (FETH) and Fidelity Solana Fund (FSOL) can stake up to all of their Ethereum and Solana holdings under normal market conditions. The funds have no minimum staking ratio. They may keep some assets unstaked to meet redemptions, pay expenses, safeguard assets and manage liquidity.

The actual staking ratio differs between the two products. As of the end of June, FSOL had staked 1,675,797 of the 1,687,589 Solana it held. Its staking ratio over the past 30 days was 99.64%. FETH, by contrast, held 476,311 Ethereum at the same point but did not separately disclose the amount staked. Fidelity said it changed its trust and custody structure in August and plans to begin staking as soon as possible after Aug. 21.

The firm also outlined liquidity measures in case staking delays redemptions. It plans to meet redemptions first with reserve assets that are not staked. If unstaking is not completed within the normal settlement period, the funds may temporarily extend settlement. If obtaining crypto assets remains difficult after that, they may pay part or all of redemption proceeds in cash instead of in kind.

Fifteen percent of staking rewards will be paid as related fees, while the remaining 85% will accrue to the funds. The rewards may be used for fund expenses, quarterly cash distributions, redemptions and additional staking. Fidelity also proposed selling staking rewards and distributing the proceeds to investors as quarterly cash payments, though the amount and timing of those payments are not guaranteed.

Fidelity is also reviewing additional ways to secure liquidity. Those include credit facilities, crypto borrowing, the sale or transfer of validator positions and liquid staking tokens, or LSTs. As of Aug. 21, however, neither fund had entered into a credit facility agreement, and some of those options would require future changes to legal, tax and exchange rules.