The U.S. Treasury Department and Internal Revenue Service (IRS) have introduced a pivotal policy shift that could reshape how cryptocurrency exchange-traded funds (ETFs) engage with staking on proof-of-stake (PoS) networks. This new regulatory update, issued as Revenue Procedure 2025-31, removes long-standing barriers that previously prevented regulated ETFs from participating in staking while preserving their favorable tax treatment.
Under the revised guidance, crypto ETFs listed on national exchanges—such as those holding Ethereum or Solana—can now stake their digital assets via approved custodians. The income generated from this staking activity can be passed directly to shareholders without triggering tax liabilities at the fund level. Instead, staking rewards will be recognized as ordinary income by the investors when they gain control over the rewards, aligning with the existing tax structure for commodity-style ETFs rather than shifting them into mutual fund territory.
This clarification provides a significant safe harbor framework, addressing how staking rewards should be reported for tax purposes. It also ensures that ETFs can distribute those yields without jeopardizing their regulatory classification. To remain compliant, these investment products must continue to hold only cash and a single cryptocurrency and must transparently disclose staking operations and associated risks, such as validator downtimes or penalties like slashing.
Analysts predict that this development could unlock substantial yield opportunities for retail and institutional investors alike. Ethereum ETFs may offer annual returns of around 3% to 5%, while Solana-focused funds could generate yields in the 5% to 7% range, depending on prevailing network dynamics and participation levels. This opens a door for passive investors to gain exposure to staking income without the need to operate validators or manage private keys—removing one of the more technical hurdles of engaging directly with blockchain ecosystems.
The change also has strategic implications for the competitiveness of U.S.-based crypto investment products. Currently, ETFs in Europe and Asia are more advanced in offering staking features. This U.S. policy update could help American issuers close that gap, especially as major asset managers like BlackRock and Fidelity are expected to revise their ETF filings to incorporate staking capabilities. Similarly, firms that focus on blockchains like Solana are preparing to roll out similar products under the new framework.
Beyond national borders, global market participants are closely watching how this move might influence regulatory harmonization. Some anticipate that these developments could spur alignment with international frameworks such as the EU’s Markets in Crypto-Assets (MiCA) regulation, potentially promoting cross-border consistency in how staking income is treated.
In practical terms, this policy shift means that investors using standard brokerage accounts in the U.S. could soon enjoy the benefits of staking without the need to engage with decentralized finance (DeFi) protocols directly. This could dramatically expand access to staking for risk-averse or less technically inclined investors, broadening the appeal of crypto ETFs as a mainstream financial product.
Moreover, this guidance arrives at a time when institutional adoption of digital assets is gaining momentum. The ability to generate yield from staking without compromising regulatory compliance may encourage greater fund inflows from pension funds, endowments, and other traditional investors that have so far remained cautious. The clarity around taxation and reporting standards significantly reduces legal uncertainty, paving the way for more structured crypto investment vehicles.
Another important aspect of the update is its emphasis on transparency. ETF issuers are now required to provide detailed disclosures about staking operations, including information about validator selection, performance metrics, and potential risks. This level of reporting could enhance investor confidence and promote better risk management across the burgeoning crypto ETF market.
Additionally, this move could influence the broader staking ecosystem, as more institutional players enter the space. Increased participation from ETFs may lead to greater network security and decentralization, especially for major PoS chains like Ethereum and Solana. It could also affect staking dynamics, including reward rates and validator competition, potentially raising the bar for service providers in terms of reliability and performance.
Looking ahead, this regulatory milestone may also prompt innovation in ETF design. New fund structures could emerge that optimize staking strategies, leverage validator diversity, or dynamically allocate between PoS assets to maximize yield while managing risk. As ETF issuers compete to attract capital, investors may benefit from more sophisticated and diversified product offerings.
In summary, the U.S. Treasury’s new guidance on staking for crypto ETFs represents a transformative step toward integrating decentralized finance features into traditional investment frameworks. By allowing ETFs to engage in staking without losing their tax-advantaged status, regulators have created a bridge between the worlds of blockchain technology and institutional finance—potentially accelerating mainstream adoption of digital assets across the investment landscape.