A $7 billion crypto ETF plumbing boom just ran into the IRS

The Internal Revenue Service (IRS) is scrutinizing a crypto-linked ETF tax strategy as Washington intensifies its campaign against structures designed to avoid taxable gains.The Treasury Department and IRS identified digital assets as one area where fund managers may be stretching tax provisions beyond their intended purpose, opening the door to additional rules or enforcement.On X, Treasury Secretary Scott Bessent said the agencies were “serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code,” casting the notice as part of a broader push against tax-motivated investment strategies.The move puts a fresh tax question over a crypto ETF market that has spent the past year adopting the same in-kind machinery long used by traditional funds. Last year, the Securities and Exchange Commission (SEC) approved in-kind creations and redemptions for spot crypto exchange-traded products, saying the change could reduce costs and price slippage.Treasury stopped short of challenging the conventional ETF redemptions. Instead, its concern centers on structures that use those transactions to achieve tax outcomes regulators say may bear little relationship t...