Blab Crypto
Fidelity to Add Staking and Quarterly Cash Payouts to Its $898 Million Ethereum ETF
When the IRS issued a safe‑harbor bulletin in November 2025 that confirmed crypto trusts could stake assets without losing their grantor‑trust tax status, Fidelity seized the opportunity to reshape its flagship Ethereum product.
The Fidelity Ethereum Fund (FETH), which currently manages roughly $898 million in net assets, will begin staking its holdings and distributing quarterly cash payouts. Under the new plan, the fund can stake up to 100 % of its ether under normal operating conditions, though it has set no minimum threshold. It will keep a portion of its ether on hand to cover redemptions, operating expenses, and liquidity needs.
Fidelity will retain 85 % of the gross staking rewards, while the remaining 15 % will be allocated to the fund sponsor, custodians, and node operators. Blockdaemon, Figment, and Galaxy have been selected as the trust’s node operators. Net staking rewards will first be used to cover the fund’s expenses, after which the remaining amount will be distributed to investors on a quarterly basis, in line with IRS rules that require distribution of net staking rewards at least quarterly.
The move brings FETH in line with other major crypto funds that have incorporated staking. Grayscale and 21Shares have added staking to their existing ether funds, and BlackRock has launched a separate staking product. By monetizing its holdings rather than simply holding, FETH joins a growing cohort of institutional‑grade crypto funds that are generating income through staking.
Ethereum’s transition to proof‑of‑stake (PoS) in September 2022 created a new revenue stream for ether holders. Staking locks ether to help secure the network and earn additional ether as rewards. For investors, staking can provide a passive income stream alongside potential price appreciation, offering an alternative to a traditional buy‑and‑hold strategy.
The IRS safe‑harbor bulletin is a key regulatory development that has enabled several funds to pursue staking. The bulletin clarifies that qualified crypto trusts may stake assets while maintaining their grantor‑trust tax classification, thereby avoiding potential double taxation of staking rewards.
Fidelity’s announcement also highlights the fund’s operational flexibility. By keeping a portion of its ether on hand, the fund can meet redemption requests without needing to liquidate positions. The ability to sell some ether to raise cash for payouts gives the fund additional liquidity management options.
As of the filing, FETH remains one of the largest spot ether ETFs in the U.S., with net assets approaching $900 million. The addition of staking and quarterly cash distributions is expected to make the fund more attractive to investors seeking income from crypto holdings.
The staking feature has not yet been activated; it remains pending regulatory approval and the effective implementation of the staking infrastructure. Fidelity has not yet disclosed a specific launch date. The fund’s compliance with IRS distribution requirements and the selection of node operators are ongoing steps.
In summary, Fidelity’s plan to add staking and quarterly payouts to FETH reflects a broader industry trend toward monetizing crypto assets through staking. The move follows IRS guidance that preserves tax status for staking, aligns the fund with peers such as Grayscale and 21Shares, and offers investors a new income stream while maintaining liquidity for redemptions. The rollout will depend on regulatory approval and operational readiness, and the market will watch for the first distribution of staking rewards.
The Fidelity Ethereum Fund (FETH), which currently manages roughly $898 million in net assets, will begin staking its holdings and distributing quarterly cash payouts. Under the new plan, the fund can stake up to 100 % of its ether under normal operating conditions, though it has set no minimum threshold. It will keep a portion of its ether on hand to cover redemptions, operating expenses, and liquidity needs.
Fidelity will retain 85 % of the gross staking rewards, while the remaining 15 % will be allocated to the fund sponsor, custodians, and node operators. Blockdaemon, Figment, and Galaxy have been selected as the trust’s node operators. Net staking rewards will first be used to cover the fund’s expenses, after which the remaining amount will be distributed to investors on a quarterly basis, in line with IRS rules that require distribution of net staking rewards at least quarterly.
The move brings FETH in line with other major crypto funds that have incorporated staking. Grayscale and 21Shares have added staking to their existing ether funds, and BlackRock has launched a separate staking product. By monetizing its holdings rather than simply holding, FETH joins a growing cohort of institutional‑grade crypto funds that are generating income through staking.
Ethereum’s transition to proof‑of‑stake (PoS) in September 2022 created a new revenue stream for ether holders. Staking locks ether to help secure the network and earn additional ether as rewards. For investors, staking can provide a passive income stream alongside potential price appreciation, offering an alternative to a traditional buy‑and‑hold strategy.
The IRS safe‑harbor bulletin is a key regulatory development that has enabled several funds to pursue staking. The bulletin clarifies that qualified crypto trusts may stake assets while maintaining their grantor‑trust tax classification, thereby avoiding potential double taxation of staking rewards.
Fidelity’s announcement also highlights the fund’s operational flexibility. By keeping a portion of its ether on hand, the fund can meet redemption requests without needing to liquidate positions. The ability to sell some ether to raise cash for payouts gives the fund additional liquidity management options.
As of the filing, FETH remains one of the largest spot ether ETFs in the U.S., with net assets approaching $900 million. The addition of staking and quarterly cash distributions is expected to make the fund more attractive to investors seeking income from crypto holdings.
The staking feature has not yet been activated; it remains pending regulatory approval and the effective implementation of the staking infrastructure. Fidelity has not yet disclosed a specific launch date. The fund’s compliance with IRS distribution requirements and the selection of node operators are ongoing steps.
In summary, Fidelity’s plan to add staking and quarterly payouts to FETH reflects a broader industry trend toward monetizing crypto assets through staking. The move follows IRS guidance that preserves tax status for staking, aligns the fund with peers such as Grayscale and 21Shares, and offers investors a new income stream while maintaining liquidity for redemptions. The rollout will depend on regulatory approval and operational readiness, and the market will watch for the first distribution of staking rewards.
