US Treasury and IRS Greenlight Crypto ETP Staking

The United States Treasury and Internal Revenue Service (IRS) have announced new guidance allowing crypto exchange-traded products (ETPs) to stake digital assets and share rewards with retail investors. The change resolves tax issues, enhances earning potential, and supports pro-crypto policies.

As clarified by the Treasury Secretary, Scott Bessent, ETP issuers can now stake assets, such as Ethereum, without losing their favorable tax status. Investors will receive rewards as ordinary income when distributed, which strengthens the U.S. position in blockchain innovation.

Clear Rules End Staking Confusion

On November 10, 2025, the Treasury and IRS provided clarity regarding staking for crypto ETPs. Previously, staking rewards created complicated tax reporting issues that discouraged issuers from staking. The new rules confirm that ETPs can keep their grantor trust status while staking assets.

However, issuers must report rewards as income when they are paid to investors. The guidance builds on a July 2023 IRS Revenue Ruling, which already treated staking rewards as ordinary income upon receipt/control. Still, the 2025 update specifically tailors this to ETP structures for regulatory clarity.

Notably, the guidance clarifies that staking does not grant the ETP sponsor control over assets and that rewards belong to the trust until distributed to shareholders. This maintains pass-through tax treatment, keeping ETFs competitive. BlackRock and Fidelity had paused their staking plans until this clarity was achieved. With the new guidance, ETH and SOL ETPs can now begin staking sooner than expected.

Expected Boost in Market and Innovation

The IRS will issue Form 1099 for reward distributions, and compliance costs will go down as reporting aligns with traditional dividend models. The Treasury aims to keep staking activities within the U.S., letting investors earn yields without managing private keys. The policy also supports the GENIUS Act’s stablecoin framework.

Bessent’s announcement is a significant step in bringing cryptocurrency into traditional finance. Staking yields of 3-7% APY will enhance ETP returns, allowing more people to earn passive income without needing technical skills. Following this guidance, institutional investments are likely to grow. 

Blockchain companies will gain confidence in U.S. regulations, contrasting with the supportive landscapes in Europe and Asia. U.S. capital markets are set to lead in the digital asset space, with the Treasury offering more guidance on decentralized finance (DeFi) and lending. This aligns with the Strategic Bitcoin Reserve initiative, which aims to establish America as a global hub for cryptocurrency innovation.

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