TLDR
- The U.S. Treasury and IRS have released new guidance for crypto ETF staking.
- The update allows cryptocurrency exchange-traded products to participate in staking without losing their tax status.
- Staking rewards will be taxed as ordinary income when received by investors, not at the trust level.
- Spot crypto ETFs can now stake holdings through qualified custodians and distribute rewards to investors.
- Issuers must disclose staking activity to investors and continue holding only cash or a single digital asset.
The U.S. Treasury Department and IRS have issued new guidance on crypto ETF staking. This change allows cryptocurrency exchange-traded products to participate in staking without losing their tax status. The update, released on Nov. 10 as Revenue Procedure 2025-31, clears the path for regulated investment products to earn on-chain yield from proof-of-stake networks such as Ethereum and Solana.
U.S. Treasury Opens Door for Crypto ETF Staking
The guidance introduces a “safe harbor” framework for staking rewards. This framework clarifies how rewards should be handled for tax purposes and avoids complications at the entity level. According to the rules, crypto ETF staking rewards will be taxed as ordinary income when received by investors, not at the trust level.
Under the new guidelines, spot exchange-traded funds can stake their holdings through qualified custodians. The staking activity must be disclosed to investors, and products must only hold cash or a single digital asset to qualify. This new structure preserves the current tax model for crypto ETFs, preventing them from being treated like mutual funds.
The IRS update allows crypto ETFs to distribute staking rewards to shareholders. As a result, investors can now access staking rewards without needing to set up a validator or interact directly with on-chain protocols. Analysts estimate that Ethereum-based ETFs could yield 3 to 5% annually, while Solana-based products may yield 5 to 7%.
Industry participants expect major ETF issuers like BlackRock and Fidelity to adjust their Ethereum ETF prospectuses. These companies are likely to include staking rewards in their offerings, following the guidance issued by the U.S. Treasury Department. This development could increase the competitiveness of U.S.-listed crypto ETFs compared to similar products in Europe and Asia.
Transparent Reporting and Operational Risks
Issuers must also publish transparent reports on the distribution of staking income. These reports should disclose operational risks such as validator performance penalties, also known as “slashing.” This is part of the framework to ensure investors understand the potential risks associated with crypto ETF staking.
Crypto ETFs will be required to maintain clear reporting on how rewards are earned and distributed. Investors will be kept informed about staking yields and any operational challenges faced by the underlying networks. This transparency helps mitigate risks and enhances investor confidence in the staking process.
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