A new safe harbor announced by the US Internal Revenue Service on Monday is seen as a major step towards allowing crypto exchange-traded products (ETPs) to share stake rewards with their investors.
Under certain conditions, the new guidance allows trusts to “invest their digital assets without jeopardizing their tax status as mutual funds and endowment funds for federal income tax purposes,” according to the IRS document, which took effect immediately. Under proof-of-stake consensus mechanisms, network participants put up or “stake” some of their crypto — Ethereum or another crypto – to secure the network, and they get a return for that.
Finance Minister Scott Bessent wrote on social media X that the policy “gives crypto exchange-traded products (ETPs) a clear path to stake digital assets and share stake rewards with their retail investors.”
He said it “increases investor benefits, boosts innovation and keeps America the global leader in digital assets and blockchain technology,” echoing the routine sentiments of President Donald Trump and his promises that the US will become the world leader in crypto.
“It effectively removes a major legal barrier that had discouraged fund sponsors, custodians and asset managers from integrating return on investment into regulated investment products,” said Bill Hughes, Consensys’ senior counsel and director of global regulatory affairs, in his own post on the X. “More regulated entities can now centralize efforts on behalf of investors, liquidity and increase investor participation, likely increase liquidity.”
Staking had been a lingering question since the arrival of crypto exchange-traded products (ETFs), which brought a new wave of investment in digital assets. The practice has emerged in conversations across the spectrum of US cryptopolice debates, and the Securities and Exchange Commission clarified earlier this year that staking does not violate securities laws.
Read more: Crypto Coalition tells SEC Staking is ‘essential good’, not a security
The IRS guidance targets permissionless proof-of-stake networks.
“The impact on gaming adoption should be significant,” Hughes said, saying the guidance “provides long overdue regulatory and tax clarity.”
The IRS’s crypto office had been through significant management turnover recently, losing a number of leaders this year as the Trump administration slashed staff and resources at the tax agency. The IRS did not respond to media inquiries asking if the office is still operating as before.
Read more: Head of IRS Crypto Work leaves as US tax changes loom for digital assets
