Fidelity takes another step toward spot ether ETF, but hurdles likely remain

Fidelity Investments is moving forward with its spot ether ETF proposal despite uncertainty around the near-term approval of such funds.

It became clear the financial services giant was looking to launch an ETH ETF in November, when Cboe — the exchange on which the product would trade — filed a 19b-4 form on behalf of Fidelity.

Now, the company filed a registration statement — known as a Form S-1 — Wednesday, marking another step in its bid to get the Fidelity Ethereum Fund approved.

The Securities and Exchange Commission would have to approve the 19b-4 as well as deem effective the S-1 form before the fund would be allowed to start trading.

Fidelity did not reveal a ticker or fee for the proposed product in the latest filing.

Similar to other proposals, however, the fund’s registration statement includes details about its intent to stake a portion of the trust’s assets via one or more staking infrastructure providers.

“As a result of any staking activity in which the trust may engage, the trust expects to receive certain staking rewards of ether, which may be treated for federal income tax purposes as income to the trust,” it states.

The fund custodian — to be Fidelity Digital Asset Services — “will maintain exclusive possession and control of the private keys associated with any staked ether at all times,” the disclosure adds.

Fidelity is one of several issuers vying to launch a spot ether ETF just months after the SEC greenlit spot BTC funds.

The US securities regulator is expected to rule on ETFs looking to hold ETH directly in late May.

A number of industry watchers have said while they expect such funds to ultimately launch, the SEC is likely to drag its feet. Others are more optimistic, given the regulator’s approval of ether futures ETFs in October — an action that ultimately helped lead to spot BTC funds gaining approval.

SkyBridge Capital founder Anthony Scaramucci said during a panel at Blockworks’ Digital Asset Summit last week that he expects SEC Chair Gary Gensler “to do things to delay it.”

Gemini Chief Operating Officer Marshall Beard said it could take another six to nine months before the SEC approves spot ether ETFs — adding that funds that stake their assets are “not going to be version one.”

The pursuit by Fidelity and others to bring to market a spot ether ETF comes as spot bitcoin ETFs continue to attract investor assets.

The 10 US spot bitcoin ETFs have notched net inflows of about $11.7 billion since launching on Jan. 11.
Another fund joined the category Wednesday, as Hashdex’s bitcoin futures fund was cleared to hold BTC directly.

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