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Notwithstanding the recent government shutdown, the IRS still delivered cryptocurrency tax guidance this month, including a safe harbor authorizing some grantor trust structures to stake cryptocurrency and additional guidance on the broker reporting rules. This guidance provides welcome clarity for the cryptocurrency market.
Grantor Trust Staking
The IRS recently published Revenue Procedure 2025-31 (the "Revenue Procedure"), which provides a safe harbor whereby grantor trusts can stake digital assets without impacting their pass-through tax status. Generally, in order to qualify as a grantor trust, the trustee must not have the "power to vary" the interest holders' investment, i.e., must not be able to take advantage of variations in the market to benefit the interest holders. Prior to the Revenue Procedure, there was uncertainty as to whether staking, whereby a holder's existing cryptocurrency is used to validate cryptocurrency transactions in exchange for tokens, could be considered a power to vary. The safe harbor provides significant clarity on the issue.
To be eligible for the safe harbor, the trust must satisfy 14 different requirements. Notably, the trust's interests must trade on a national security exchange (e.g., exchange-traded products), the trust must only hold cash or one class of digital asset, and the trust's assets must be held by a custodian who oversees the staking of the trust's digital assets. The Revenue Procedure is effective for tax years ending on or after November 10, 2025. Additionally, until August 10, 2026, trustees may amend the organizational documents for trusts established before the November effective date to authorize staking without jeopardizing grantor trust status.
Broker Reporting
The IRS recently released FAQs elaborating on the cryptocurrency broker reporting regime, which we previously covered in detail here and here. Most importantly, the FAQs clarify that only businesses effecting sales transactions for customers such as cryptocurrency ATMs are subject to the broker reporting rules. Businesses that merely provide custodial services such as cryptocurrency wallet providers and software developers are not subject to the broker reporting rules.
The FAQs also clarify that brokers can rely on customer-provided information to identify the assets sold but not to report the customer's basis. Other broker reporting issues addressed include combined sales of self-minted and third-party-minted non-fungible tokens, optional reporting rules for stablecoins, and transaction fees.
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