Staking Rewards for the Masses: IRS Paves Way for Crypto ETPs to Share Profits

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Retail investors are a major step closer to earning staking rewards through traditional financial products, thanks to new guidance from the IRS. The agency has created a safe harbor allowing exchange-traded products (ETPs) to stake the digital assets they hold and pass the earnings on to investors.

“This move increases investor benefits, boosts innovation, and keeps America the global leader in digital asset and blockchain technology,” said Treasury Secretary Scott Bessent.

The 18-page guidance includes a safe harbor with specific rules, such as requiring the ETP to use a qualified custodian and stake only on permissionless networks.

This clarifies a key tax question and follows the SEC’s stance that proof-of-stake is not a securities transaction, effectively opening the door for a new class of income-generating investment funds.