IRS Guidance and SEC Rules Accelerate Crypto-ETF Integration into Mainstream Investment Landscape

The structural evolution within the digital asset Exchange Traded Product (ETP) sector has reached a critical juncture. The focus is clearly shifting away from pure speculation toward established investment classifications. This significant pivot is being fueled by recent regulatory actions originating from both the U.S. Internal Revenue Service (IRS) and the Securities and Exchange Commission (SEC). Consequently, product offerings are expanding, and investor sentiment is increasingly leaning toward long-term asset holding.

Several landmark events are defining this new environment. Key among them are the IRS's issuance of guidance on November 10, 2025, and the SEC's approval of generic listing standards on September 17, 2025. These actions are part of a broader trajectory that began in July 2025 with the SEC's decision to permit in-kind creation and redemption mechanisms for spot Bitcoin and Ether ETFs. Collectively, these developments signal a fundamental change in how mainstream investors gain access to digital assets.

A cornerstone of this newfound regulatory clarity is the IRS Revenue Procedure 2025-31, released on November 10, 2025. This crucial document establishes a safe harbor for trusts, including those structured as crypto-ETFs. It explicitly allows these entities to engage in asset staking, specifically mentioning assets like Ether (ETH) and Solana (SOL), without jeopardizing their status as either an investment trust or a grantor trust. Treasury Secretary Scott Bessent noted that this IRS guidance enhances investor benefits and fosters innovation by permitting funds to earn and distribute blockchain staking rewards.

To qualify for this beneficial tax regime, trusts must adhere to 14 stringent requirements. These mandates include trading on a national stock exchange and limiting holdings to only one type of digital asset. Furthermore, the assets must be held by a qualified custodian, while the trust retains legal ownership. Existing trusts have a nine-month window, commencing November 10, 2025, to amend their governing documents to adopt this safe harbor provision.

Running parallel to these tax developments, the SEC gave its nod to generic listing standards for commodity-based ETPs, which encompass crypto assets, on September 17, 2025. This ruling significantly streamlines the approval pathway for certain crypto-ETFs. It bypasses the previous requirement for a time-consuming, product-by-product rule change under Section 19(b) of the Securities Exchange Act of 1934—a major bottleneck. For an asset to qualify under these new generic standards, its underlying futures market must have been active for at least six months, or an ETF offering at least 40 percent exposure to that asset must already be trading on a national exchange.

This regulatory streamlining is anticipated to trigger a wave of new ETF launches tracking assets such as Solana, Litecoin (LTC), and Hedera (HBAR) toward the close of October 2025. While this opens doors, it simultaneously increases operational complexity for issuers, particularly concerning the quarterly reporting mandates under the Investment Company Act of 1940. Issuers are now tasked with navigating both the staking rules and the enhanced disclosure requirements.

These structural shifts were a hot topic at the ETP Forum in New York on November 18, 2025. The gathering brought together ETF issuers, auditors, and legal counsel to dissect the implications. Participants, including Mike Dellavalle from Cohen & Co, debated how these regulatory shifts impact portfolio construction and the long-term adoption of crypto-ETFs by traditional investors. The forum, marking its 14th iteration and representing professionals overseeing over $10 trillion in global ETF assets, underscored that digital maturity now demands the industry expertly manage the complexities of staking and liquidity.

While spot Bitcoin and Ether ETFs already command a substantial share of their respective asset market capitalization, these new rules pave the way for a much broader spectrum of products to integrate seamlessly into conventional portfolios. Adding a layer of operational complexity, a partial government shutdown that began on October 1, 2025, introduced temporary delays into the review processes, injecting a degree of short-term uncertainty into this transformative period.