Treasury Secretary Scott Bessent recently announced that the Treasury and the Internal Revenue Service (IRS) have provided a clear legal pathway for exchange-traded funds (ETFs) and trusts to stake crypto assets and share rewards with investors.
New Crypto Staking Provisions
Bill Hughes, a market expert and lawyer from the blockchain software firm ConsenSys, explained that, under the new provisions announced by Secretary Bessent, trusts can stake digital assets on permissionless proof-of-stake (PoS) networks if they meet specific criteria.
These requirements include holding only one type of crypto asset along with cash, utilizing a qualified custodian to manage keys and execute the staking process, and maintaining Securities and Exchange Commission (SEC)-approved liquidity policies. This ensures that redemptions can occur even when assets are staked.
Additionally, trusts must establish arms-length arrangements with independent staking providers and restrict their activities solely to holding, staking, and redeeming assets, avoiding any discretionary trading.
Hughes believes that the implications for staking adoption are substantial. This offers much-needed regulatory and tax clarity for institutional investment vehicles, including crypto ETFs and trusts. It enables these entities to engage in staking while remaining compliant with existing laws.
By effectively removing a significant legal hurdle that has previously deterred fund sponsors, custodians, and asset managers from integrating staking yields into regulated investment products, the new framework opens the door for broader participation.
Increased Staking Participation Anticipated
As a result of these developments, the expert asserted that more regulated entities will likely begin staking on behalf of investors, which could lead to increased staking participation, enhanced liquidity, and greater network decentralization.
Notably, this new framework aligns tax treatment with evolving SEC disclosure requirements and exchange liquidity standards, reinforcing staking as a legitimate and conservative yield-generation strategy within US financial products.
Featured image from DALL-E, chart from TradingView.com
