IRS Clears Crypto Trusts to Stake Assets Without Losing Key Tax Status
The IRS has released Revenue Procedure 2026-20, introducing a safe harbor that allows specific investment and grantor trusts to engage in proof-of-stake digital asset staking without losing their federal tax classification.
The U.S. Internal Revenue Service has introduced a safe harbor permitting specific investment and grantor trusts that engage in proof-of-stake digital asset staking to do so while retaining their federal tax classification as trusts. Released on Oct. 6, Revenue Procedure 2026-20 supersedes Revenue Procedure 2025-31, which was published in November 2025.
This safe harbor applies to trusts holding digital assets on permissionless proof-of-stake blockchains. When a trust that qualifies for the safe harbor authorizes or performs staking activities, it will not automatically forfeit its status as an investment trust under Section 301.7701-4(c) or as a grantor trust. However, the safe harbor does not grant general tax advantages or benefits regarding staking income or any other tax matters.
IRS Sets Strict Conditions for Crypto Trust Staking
Qualifying vehicles encompass state law trusts that meet standard investment and grantor trust criteria. Trust interests must be traded on a U.S. national securities exchange, and information disclosed about these interests must adhere to SEC regulations. Furthermore, the trust must fulfill other requirements of the national securities exchange to ensure liquidity for its interests.
Eligible holdings comprise cash alongside a single digital asset that utilizes a permissionless proof-of-stake mechanism. Custodians are required to hold private keys to stake the digital asset through one or more third-party providers. Neither the trust nor its sponsor may maintain any affiliation with these third-party providers, and all agreements governing the sharing of staking rewards must be conducted at arm’s length.
The guidelines mandate that the fund’s digital assets remain available for staking, though provisions are made for reserve positions that facilitate redemptions. Additional exemptions to this rule cover temporary periods where portions of the fund’s digital assets are left unstaked to cover expenses, manage purchases and sales, comply with legal obligations, or protect the fund’s assets against network- and validator-related hazards.
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To address redemption requests, trusts may employ contingent liquidity mechanisms, which include credit facilities and specific agreements with digital asset counterparties. The regulations additionally require trusts to incorporate safeguards against slasher events originating from staking service providers that could inflict losses on the trust.
Staking Rewards Must Reach Investors on Schedule
Reward distributions must be disbursed in the identical digital token held by the trust. Expenses must be covered by distributing the digital token to investors, utilizing cash generated from selling digital tokens to investors, or through a combination of both tokens and cash. Reward payments must be distributed equitably and fairly to all investors within a defined timeframe following each calendar quarter.
These regulatory adjustments are tailored to accommodate the growing integration of cryptocurrency staking by U.S. investors participating in cryptocurrency investment products. The safe harbor permits eligible trusts to carry out cryptocurrency staking within a trust framework without endangering their federal tax-exempt status, provided they satisfy all remaining safe harbor conditions.
Existing arrangements have been granted a six-month transition window until Oct. 6, 2026, to execute necessary measures, such as implementing internal modifications to authorize delegated staking and other adjustments. Current arrangements are permitted to rely on the 2025 safe harbor throughout this six-month timeframe. Revenue Procedure 2026-20 takes effect for taxable years ending on or after Oct. 6, 2026.
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The IRS explicitly cautions taxpayers against applying this guidance to alternate scenarios. The agency does not provide instructions regarding other matters associated with staking income, U.S. trade or business activities, unrelated business income derived from digital assets, network forks, airdrops, or other digital asset operations.
