Entity Setup
How Digital Asset Trusts Can Stake Without Losing Grantor or Investment-Trust Status
New IRS safe harbor allows trusts to stake digital assets while maintaining their tax classifications—here’s what trustees need to know and how to act by the deadline.
By NomadicTax Research Team • 5-8 min read • November 24, 2025
## Introduction
Trusts holding digital assets (like those that qualify as investment trusts under § 301.7701-4(c) and as **grantor trusts**) often worry that staking activities—validating transactions on a proof-of-stake blockchain—might jeopardize their favorable tax status. Thanks to **Revenue Procedure 2025-31**, which became effective as of **November 10, 2025**, the IRS provides a safe harbor so long as certain criteria are met. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
---
## What the Safe Harbor Allows
Under the safe harbor:
- Trusts are allowed to stake digital assets **without losing their classification** as both investment trusts and grantor trusts for U.S. federal income tax purposes. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- The trust must meet detailed conditions, including restrictions on which digital assets, how staking is managed, custody, liquidity, disclosures, and relationships with staking providers. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- Existing trusts have a **limited amendment window** (nine months starting November 10, 2025) to modify governing documents to satisfy these requirements without risking status. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
---
## Key Requirements (Section 6.02)
Trusts must satisfy **all** of the following:
- Interests are **listed and traded** on a national securities exchange, with disclosures regarding staking and approvals per SEC rules. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- Trust holds only **cash + a single type of digital asset**, in a permissionless proof-of-stake network. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- A **custodian** securely holds assets and private keys; only they may move or stake the assets, ensuring the trust retains tax ownership. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- Trust maintains **liquidity procedures** so that enough assets are available for redemption requests, including a liquidity reserve and clearly documented policies. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
- Rules for staking rewards: they must be distributed either in-kind or sold for cash, and distribution at least **quarterly**, net of expenses. ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
---
## Practical Examples and Implications
- **Example**: A digital-asset mutual trust trades shares on NYSE, holds Ethereum, stakes via a custodian; distributes staking rewards quarterly; modifies its trust agreement in December 2025 to authorize staking. It meets safe harbor — status preserved.
- **Pitfall**: A trust staking assets without liquidity reserve, or whose sponsor controls staking provider, could violate conditions — losing investment trust or grantor status.
---
## Action Steps for Trustees/Public Sponsors
1. **Review trust agreement** immediately to see if changes are needed; note amendment window ends around August 2026 (nine months from Nov 10, 2025). ([irs.gov](https://www.irs.gov/irb/2025-48_IRB?utm_source=openai))
2. Ensure disclosures meet SEC standards, that the trust is listed on an exchange, assets are limited to a single asset type, and custody arrangements are secure.
3. Establish liquidity policies and reserve: decide what percentage of assets must stay “unstaked” to meet redemption demands.
4. Plan rewards distribution schedule and expense allocation clearly.
5. Consult legal and tax advisors familiar with IRS procedures, SEC listing rules, and proof-of-stake technical details.
---
## Why This Matters
- Provides clarity for trusts that want to participate in staking without losing tax advantages.
- Encourages innovation in digital asset investing under regulated structures.
- Time sensitive: amendment windows and effective dates put pressure on trustees to act before losing safe harbor protection.
---
**Bottom line:** Revenue Procedure 2025-31 offers a roadmap for digital-asset-holding trusts to stake assets, retain tax status, and satisfy legal, SEC, and IRS obligations—provided they act promptly and follow detailed requirements.