Crypto ETFs Can Now Offer Staking Rewards Under New IRS Rules

TLDR

• The IRS released new guidance allowing crypto trusts and ETPs to stake digital assets without losing their tax status
• Treasury Secretary Scott Bessent said the policy gives crypto ETPs a clear path to stake assets and share rewards with investors
• The guidance applies to permissionless proof-of-stake networks and went into effect immediately
• Industry experts say this removes a major legal barrier that discouraged fund sponsors from offering staking yields
• The move is expected to increase staking participation and help position the US as a leader in digital assets

The Internal Revenue Service issued new guidance on Monday that allows crypto exchange traded products to participate in staking without triggering tax problems. The policy change went into effect immediately and applies to trusts holding digital assets.

Under the new rules, trusts can stake their digital assets while maintaining their tax status as investment trusts and grantor trusts for federal income tax purposes. This applies to trusts traded on national securities exchanges that hold cash and units of a single type of digital asset with a qualified custodian.

Treasury Secretary Scott Bessent announced the guidance on social media platform X. He said it gives crypto ETPs a clear path to stake digital assets and share staking rewards with retail investors.

The guidance targets permissionless proof-of-stake networks. In these systems, network participants lock up cryptocurrencies like Ethereum to secure the network and receive returns for doing so.

Bill Hughes, senior counsel at Consensys, called the guidance a major development. He said it removes a legal barrier that had discouraged fund sponsors, custodians, and asset managers from integrating staking yield into regulated investment products.

Impact on Crypto ETF Market

The new policy addresses a question that emerged after crypto exchange traded funds launched in the United States. These products brought new investment flows into digital assets but could not offer staking returns to investors.

Staking has been discussed in various US crypto policy debates. The Securities and Exchange Commission clarified earlier this year that staking does not violate securities law.

The IRS guidance requires trusts to meet specific conditions. They must be traded on national securities exchanges and hold only cash and units of one type of digital asset. The assets must be held by a custodian and the trusts must have measures to mitigate investor risks.

Regulatory Clarity for Staking

Hughes said the guidance provides regulatory and tax clarity that the industry has been waiting for. He expects the impact on staking adoption to be substantial.

More regulated entities can now stake on behalf of investors. This is expected to increase staking participation, liquidity, and network decentralization.

The guidance follows the SEC’s September approval of generic listing standards for crypto exchange traded funds. The IRS and Treasury noted this SEC rule change as part of their updated guidance.

The IRS crypto office experienced leadership turnover this year as the Trump administration reduced staff and resources at the tax agency. The IRS did not respond to questions about whether the office continues to operate as before.

Bessent said the policy increases investor benefits and boosts innovation. He echoed President Trump’s statements about making the United States the global leader in digital asset and blockchain technology.

The guidance came during the final days of a government shutdown that lasted over 40 days. Many staff at departments including the SEC and IRS were furloughed during this period.

The post Crypto ETFs Can Now Offer Staking Rewards Under New IRS Rules appeared first on CoinCentral.