Key Highlights
- On November 10, the U.S. Treasury Department and Internal Revenue Service (IRS) shared an updated guideline to provide a clear path to Crypto ETPs for staking digital assets
- This new guideline will allow ETP issuers to stake underlying assets on blockchain networks and distribute the staking rewards directly to retail investors
- This new updated guideline on crypto ETPs comes after the SEC clarified that certain liquid staking activities do not constitute securities offerings under federal law
On November 10, the U.S. Treasury Department and the Internal Revenue Service (IRS) issued new guidance that provides a clear regulatory framework for crypto exchange-traded products (ETPs).
This will allow crypto ETFs, such as spot Bitcoin or Ethereum ETFs, to engage in staking activities for proof-of-stake (PoS) digital assets.
“This move increases investor benefits, boosts innovation, and keeps America the global leader in digital asset and blockchain technology,” Treasury Secretary Scott Bessent stated in a post on X (formerly Twitter).
What is the New Guideline for Crypto ETPs with Staking?
This new regulatory framework will allow issuers of exchange-traded products to participate in “staking” the crypto assets held within their funds.
Staking is the process that generates rewards that can be passed on to everyday investors, which involves supporting the operations of a blockchain network.
These payouts will be treated in a manner comparable to dividends from traditional stocks or funds, which offers a new source of potential income.
Previously, strict regulations in the United States had limited these ETPs to a passive role, which allowed them only to hold assets without the ability to generate such yields.
The policy was formally announced in a statement from Treasury Secretary Scott Bessent, who showed that its main goals are to expand investor access to blockchain-based returns.
The guidance clearly authorizes crypto exchange-traded products (ETPs) to engage directly in staking protocols. This means funds can now lock up assets on proof-of-stake networks like Ethereum and Solana to help validate transactions and earn rewards in return.
The new rules allow these rewards to be distributed to investors without creating immediate tax complications for the fund itself, as long as strict compliance measures are followed.
The main benefit for the average investor is the ability to earn a passive income stream. Through a standard brokerage account, individuals can now gain exposure to staking yields without the technical knowledge required to manage private wallets.
Some experts are now expecting a boost in both institutional and retail demand for proof-of-stake tokens, which will boost the expansion of the crypto ETP market.
However, ETP issuers will also have to maintain a high level of transparency for their staking operations. This includes clear disclosures of risks to investors, such as the potential for slashing, where a validator can be penalized and lose a portion of their stake assets for network failures or malicious behavior.
The guidance also made clear that staking rewards are taxable as ordinary income for the investor, which is based on the fair market value at the moment the investor gains control over them.
SEC Cleared Confusion around Liquid Staking Tokens
The statement from Treasury Secretary Scott Bessent comes after the U.S. Securities and Exchange Commission (SEC)’s Division of Corporation Finance issued a staff statement in August. In the statement, the agency clarified that certain liquid staking activities do not constitute securities offerings under federal law. This statement has opened the door for many ETFs with liquid staking tokens, including Solana.
The official press release stated, “Accordingly, it is the Division’s view that participants in Protocol Staking Activities do not need to register with the Commission transactions under the Securities Act, or fall within one of the Securities Act’s exemptions from registration in connection with these Protocol Staking Activities.”
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