IRS Safe Harbor for Crypto Staking in ETPs Spurs ETH & SOL ETFs
US Treasury and IRS introduced Revenue Procedure 2025-31, offering a safe harbor for crypto staking in ETPs. Under the new rules, ETPs on national securities exchanges with SEC-approved disclosures can stake a single Proof-of-Stake asset and distribute staking rewards directly to investors without immediate fund-level taxation. Issuers opting for entity-level taxation can pool rewards and distribute them as cash or extra shares. ETPs must hold only cash and one PoS token, limit management to core tasks, and use third-party custodians and independent staking providers for key security. This guidance resolves previous tax risks that treated staking rewards as corporate income, clearing a major hurdle for product launches. The move follows an SEC bulletin clarifying liquid staking is not a security. Industry leaders say this tax policy will spur innovation, unlock institutional capital, and pave the way for ETH and SOL staking ETFs. Traders may see increased demand for these ETPs and heightened market activity around staking assets.
Bullish
This tax safe harbor removes a major regulatory barrier for crypto staking products, directly enabling ETP issuers to launch ETH and SOL staking ETFs. In the short term, traders may rotate into these new vehicles, boosting demand for staking tokens. Over the long term, clearer IRS guidance should attract significant institutional capital, support staking yields, and strengthen market confidence in Proof-of-Stake assets. Historical precedents show that tax clarity often leads to price appreciation by reducing investor uncertainty.