Asset manager Fidelity has filed an application with the U.S. SEC to create a spot Ethereum exchange-traded fund that would feature staking in its structure.
Fidelity filed an S-1 application with the United States Securities and Exchange Commission on March 27 to create a spot Ether (The asset management giant’s ETF would trade on the Cboe BZX Exchange. Fidelity Digital Asset Services, which affiliated with sponsor FD Funds Management, would serve as custodian of the trust’s ETH. According to the S-1:
The Trust intends to establish a program to stake a portion of the Trust’s assets through one or more staking infrastructure providers. That decision entails additional risk, the application noted. There would be a risk of loss “including in the form of ‘slashing’ penalties” and liquidity risks while the stake is being processed. In addition, staking rewards would be treated as income for the fund for tax purposes, as a result of which investors will experience a taxable event “without an associated distribution from the Trust.”
The application does not specify the expected fees for the ETF. In case of a fork, the custodian will decide which chain the fund will support.There are multiple other risks associated with the ETF. The form points out that regulatory measures in the United States and elsewhere could negatively impact the fund. Among the potential causes of the termination of the trust, it lists regulatory action such as the SECan investment company under the 1940 Act, the U.S.
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