Ether ETFs Go Live | New Crypto Tax Reporting Rules

Among the newly listed funds, BlackRock’s iShares Ethereum Trust ETF (ETHA) attracted the highest inflows, totaling $266.5 million, according to Bloomberg. Bitwise’s Bitwise Ethereum ETF (ETHW) also saw significant inflows, with $204 million invested.

On the other hand, the Grayscale Ethereum Trust (ETHE) experienced redemptions of $485 million. This may be due to investors seeking cheaper alternatives (Grayscale charges a 2.5% fee, 10 times more than the second-highest fee among the newly listed funds) or utilizing the ETF conversion to take advantage of increased liquidity compared to the previous closed-end structure.

A significant concern for some investors is the SEC’s exclusion of the staking mechanism in the ether ETFs. Staking, a key feature of the Ethereum blockchain, allows users to lock up their tokens for a certain period in exchange for yield. The SEC currently permits the ETFs to hold only regular, unstaked ether.

Mandatory yearly reporting will begin in 2026, with digital currency brokers required to cover gross proceeds from sales in 2025 via Form 1099-DA. In 2027, brokers must include the cost basis, or purchase price, for certain digital asset sales for 2026.

However, some concerns remain regarding the definition of a broker. The final regulations do not alleviate these worries, as they do not include reporting requirements for decentralized or non-custodial brokers that do not take possession of the digital assets being sold or exchanged. Taxpayers should stay alert for additional guidance from the IRS, which is expected to be released soon. Many anticipate further clarification might come this year.

To navigate these changes effectively, seek early tax advice from knowledgeable and trusted tax advisors.