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Fidelity Slashes Staking For Ethereum ETF In Latest S-1 Amendment

Published

11 months ago

May 21, 2024

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Fidelity has submitted an amended S-1 application to the United States Securities and Exchange Commission (SEC) for its proposed Spot Ethereum ETF. This development comes amid increasing anticipation surrounding the potential approval of these ETFs on May 23. In addition, it may boost the approval odds for Ether ETFs.

Fidelity Amends Spot Ethereum ETF S-1 Filing

The updated application clarifies that the ETF’s underlying Ether (ETH) tokens will not be staked. This move addresses concerns related to the security and regulatory implications of staking activities. For context, the S-1 filing is a mandatory registration document required by the SEC for launching publicly traded securities in the U.S. Hence, it ensures transparency and compliance with federal regulations.

This amendment follows recent reports indicating that the SEC may have reversed its stance on Spot Ethereum ETFs. Allegedly, political pressures have influenced the SEC’s approach. The agency has hence led to requests for issuers to revise their 19b-4 filings, which detail the operational and procedural aspects of the proposed ETFs.

The next significant date in this regulatory process is May 23, the deadline for the SEC to make a decision on VanEck’s Spot Ethereum ETF proposal. Moreover, market sentiment regarding the approval of these ETFs has shifted considerably.

Hence, Eric Balchunas, a senior ETF analyst at Bloomberg, has notably increased the probability of the SEC approving the 19b-4 form for these products from 25% to 75%. This heightened optimism reflects growing confidence within the financial community about the SEC’s eventual approval of Spot Ethereum ETFs.

Furthermore, the latest step by Fidelity hints at a favorable outcome since removing the staking feature could influence the SEC’s decision positively. Balchunas also commented on the development, noting that the SEC wouldn’t allow staking via Ethereum ETFs. In a post on X, the Bloomberg analyst wrote, “Looks like you got a final answer as to whether SEC will allow staking: No. As this is first amendment of any document to roll in post-SEC 180 and their comments to issuers yesterday.”

Also Read: Ethereum ETF Buzz Hint Biden’s Crypto Policy Shift, What’s The Catch?

SEC To Play On ETH & Staked ETH Dynamics

The U.S. SEC’s recent request for issuers of Spot Ethereum ETFs to submit their 19b-4 filings has caused a strong market reaction, suggesting increased chances of approval. Historically, Ethereum’s ambiguous ‘security’ status has been a significant obstacle for ETF approval. However, the SEC’s latest move implies a potential shift in their stance.

Galaxy researcher Alex Thorn has provided insight into this development. Thorn suggests that the SEC might be preparing to differentiate between Ethereum (ETH) and staked Ethereum (stETH) or “staking as a service ETH” when considering securities. This distinction could align with the SEC’s ongoing court cases and investigations. Hence, it could allow the approval of Ethereum ETFs while upholding the agency’s previous positions.

Moreover, Thorn’s analysis indicates that by recognizing staked ETH as a separate category, the SEC could facilitate the regulatory acceptance of Ethereum ETFs without contradicting its earlier views. This approach could resolve the regulatory uncertainties that have previously hindered the approval process, potentially opening the door for Ethereum ETFs in the U.S. market.

Fidelity’s latest move aligns with this prediction, solidifying the possibility of SEC playing on the dynamics of ETH and staked ETH. Moreover, it signals a similar move from other ETF applicants. Earlier this month, Ark 21Shares also pulled out the staking clause from its Ether ETF S-1 filing.

Also Read: Ethereum ETF Buzz Hint Biden’s Crypto Policy Shift, What’s The Catch?