In a groundbreaking move, the U.S. Treasury and the IRS have paved the way for cryptocurrency exchange-traded funds (ETFs) to engage in staking, marking a crucial moment in the realm of digital asset investing.

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With the announcement of Revenue Procedure 2025-31, ETFs that manage proof-of-stake (PoS) cryptocurrencies—including Ethereum (ETH) and Solana (SOL)—are now permitted to stake their tokens and directly pass on the staking rewards to investors, all while maintaining their favorable tax positions.

A New Era for Crypto ETFs

Treasury Secretary Carol Adams emphasized the importance of this initiative, stating it positions the U.S. as a leader in blockchain technology.

The updated guidance introduces a “safe harbor” provision for regulated funds, providing clarity on the taxation and distribution of staking rewards. Investors will now be liable for taxes only upon receiving their rewards, allowing ETFs to avoid taxation at the trust level.

Market specialists laud this decision as the essential regulatory certainty that will enable institutional investors to participate in staking. Projections suggest that this could lead to an influx of $4 billion to $8 billion into staking-based crypto initiatives within the next year.

Compliance Regulations for Asset Managers

For ETFs to qualify under this new regulatory framework, they must adhere to specific guidelines. This includes only holding one type of digital asset alongside cash, utilizing accredited custodians for asset security, and collaborating with vetted staking service providers for validation processes.

This framework not only fosters investor protection but also intertwines conventional finance with decentralized systems. It builds on recent SEC approvals regarding crypto ETFs, thereby confirming that specific staking activities do not fall under the category of unregistered securities.

John Richardson, a regulatory advisor at Digital Assets Group, highlighted that this framework resolves the significant legal and tax concerns that had previously inhibited institutions from adopting staking within regulated offerings.

This development instills confidence in fund managers to develop yield-bearing ETFs, facilitating passive income generation through effective network participation.

Transforming Policy into Profits

Historically, fund managers in the U.S. have shied away from staking activities due to regulatory uncertainties and the risk of losing beneficial tax status. However, with this new guidance, both individual and institutional investors can now reap an estimated 4–8% annual rewards on assets like ETH and SOL through ETFs, all without the complications of managing nodes or wallets.

This regulatory maneuver comes on the heels of a notable 40-day government stasis, marking one of the first significant actions post-reopening. It reflects renewed momentum in policymaking and a wider acceptance of digital currencies within U.S. governance.

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Observers believe this strategic move solidifies the United States’ status as a frontrunner in digital asset regulation and could ignite a surge of staking-focused ETFs from major financial players like Vanguard and JPMorgan.

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