Briefing
The U.S. Treasury Department and the Internal Revenue Service (IRS) have issued Revenue Procedure 2025-31, establishing a crucial safe harbor that permits regulated Exchange-Traded Products (ETPs) to participate in digital asset staking. This action immediately resolves the primary tax barrier → the risk of losing favorable pass-through tax status → that previously prevented institutional funds from earning on-chain yield, structurally integrating this core decentralized finance activity into traditional finance. The guidance is contingent on strict compliance requirements, including the mandatory use of qualified custodians and adherence to SEC-approved liquidity standards, and analysts project this new framework could unlock an estimated $3 billion to $6 billion in new capital inflows to Proof-of-Stake ecosystems.
Context
Prior to this guidance, the integration of staking into regulated investment products was stalled by fundamental tax and legal ambiguity. Fund managers feared that generating income through staking would compromise the ETP’s classification as a “grantor trust” for federal income tax purposes, thereby triggering entity-level taxation and destroying the product’s economic viability for investors. This uncertainty, coupled with the lack of clarity on how to manage the operational risks of staking (e.g. slashing) within a regulated custody model, created an insurmountable compliance hurdle for all Proof-of-Stake-based investment product development.
Analysis
This Revenue Procedure fundamentally alters the product structuring landscape for regulated entities. The establishment of a clear safe harbor provides the necessary legal certainty for fund issuers to confidently launch staking-enabled ETPs for assets like Ethereum and Solana. The requirement for a qualified custodian to manage the private keys and staking execution mandates an immediate update to the operational risk and control frameworks of all custody providers. Consequently, this regulatory clarity directly links the passive income generated by decentralized network validation to the highly regulated U.S. capital markets, creating a new, compliant yield-generation strategy for institutional and retail investors.
Parameters
- Revenue Procedure Number → Revenue Procedure 2025-31 (The official IRS/Treasury guidance document creating the tax safe harbor).
- Estimated New Inflows → $3 Billion to $6 Billion (Analyst projection of capital entering PoS networks).
- Targeted Annual Yield → 3% to 7% (The expected range of staking rewards for PoS assets like ETH and SOL).
- Compliance Deadline → Nine-Month Window (Timeframe for existing ETPs to modify trust structures to comply with the new rule).
Outlook
The immediate strategic outlook involves a rapid wave of product modification and new filings as fund issuers leverage the nine-month window to integrate staking into existing ETPs. This action sets a powerful precedent, establishing staking as a legitimate, conservative yield-generation strategy within the traditional financial system. The next phase will involve the SEC’s Division of Investment Management providing further granular guidance on the mandated liquidity and risk management controls, ensuring that the operationalization of staking adheres to established investor protection standards, thereby accelerating the institutionalization of Proof-of-Stake networks.
Verdict
The Treasury and IRS guidance decisively legitimizes on-chain staking yield as a core component of compliant, regulated U.S. financial products, fundamentally de-risking the institutional adoption of Proof-of-Stake digital assets.
