Fidelity's ETFs Get Staking Power, But Exit Risks Linger

Fidelity has granted its Ethereum (FETH) and Solana (FSOL) exchange-traded funds (ETFs) authority to stake up to 100% of their crypto holdings under normal conditions. The ETFs' sponsor, FD Funds Management, can keep the underlying assets unstaked for foreseeable redemptions, expenses, asset protection, and its liquidity program.

According to the Aug. 21 prospectuses for FETH and FSOL, neither fund has a minimum staking requirement. As of June 30, FSOL reported that it had staked 1,675,797 SOL out of 1,687,589 SOL held, with a fair value of $126.3 million.

The redemption process for the ETFs involves a layered plan to meet redemptions when network exits take too long. Reserves are the first buffer, and if they are insufficient and unstaking cannot finish within the standard settlement window, the sponsor may extend settlement temporarily. If an exit still is not practicable within a reasonable extended period, it may deliver cash in place of some or all of the crypto owed in an in-kind redemption.

The timing risk for FETH and FSOL staking differs by network. FSOL expects to regain complete control of its staked SOL within two days under normal conditions, without guaranteeing that result. FETH gives no fixed duration: Ethereum validators must leave the active set and pass a mandatory wait before the network's withdrawal sweep processes them.