Introduction

Since President Trump’s inauguration, the crypto industry has been on a tear. And no, this time, we’re not just talking about the price of Bitcoin. In the past two months, Washington D.C. has taken a deliberate interest in the crypto industry. In this article, we’ll explore legislative and regulatory efforts with the potential to elevate the “digital asset” industry to a broader U.S. market.

Bigger Picture

The Trump administration wants crypto to blossom, and for that to happen in the United States. This is a reversal from President Biden’s approach, made evident by President Trump’s executive order on crypto in his third day in office.

Further, the Trump administration is bringing together key stakeholders within the federal government:

• A majority of Congress is now supportive of (or less against) crypto.
• The crypto lobby landed over 90% of its desired candidates in the last election.
• The acting chair of the SEC (Mark Uyeda), another key commissioner (Hester Peirce) and the nominated SEC chair (Paul Atkins) are supportive of crypto and are experts in the industry.
• The nominated CFTC commissioner (Brian Quintenz) publicly supports crypto and has spent time at venture capital firm Andreesen Horowitz, a firm with a reputation for backing the digital asset industry.
• President Trump’s appointees for Commerce (Howard Lutnick) and Treasury (Scott Bessent) each have a long history of support for the crypto industry.
• The United States Supreme Court’s conservative majority could provide crypto proponents with the high-level air cover needed to ensure these legislative and regulatory changes are implemented. 

If the digital asset industry can get some workable rules in place, we could see a step-function increase in investment in this sector. On the other hand, if Congress is unable to pass needed crypto legislation, the digital asset industry would likely continue to shift offshore to crypto-friendly jurisdictions like the Cayman Islands and Abu Dhabi. 

What does this mean for business?

Here are some things to watch in investment management, for general corporates, for banks and for startups.

Investment Management: Rules classifying digital assets as securities or commodities (or neither!) could ease investment decision-making. A clearer regulatory framework could: (i) help venture funds adjust and streamline their legal forms of investment; (ii) provide a legally safer trading universe for hedge funds; (iii) provide compliance departments with reliable policies and procedures and (iv) increase broker-dealer participation for crypto market making. Back- and mid-office issues like custodying unsupported tokens could be resolved. Rules for stablecoin issuers could reduce counterparty and reputational risk related to use of those products. Larger asset managers may explore bringing new exchange-traded products to market, expanding access for institutional investors like pensions, endowments, foundations and larger RIAs.

Large Corporates: We saw household-name companies dabble in blockchain and “Web-3” a few years ago, including major retail brands, gaming companies, celebrities and sports teams using NFTs to build brand loyalty and facilitate direct company to consumer interaction. Crypto can help gamify experiences, providing instant, ownable blockchain-powered rewards and collectibles that can be traded instantly and globally. If lawmakers can provide clarity for the celebrities and the C-suite, we could see renewed interest in these initiatives.

Banks: As custodians of U.S. dollars and other “real” currencies, banks are a natural fit to custody crypto assets, and we saw major interest in this a few years ago from most global custodians and exchanges. As discussed below, interest from institutional banks waned as the SEC and FDIC purportedly pressured the banking industry to avoid crypto. However, with the recent shift in regulatory attitude, and the repeal of “SAB 121,” we could see a resurgence of custody interest from traditional banks, and an expanded customer base for them if they choose to service companies with crypto exposure.

Startups: A collaborative SEC paired with legislative clarity changes the calculus for young companies with crypto products or business lines. These companies could consider launching from the United States (vs. offshore) and could potentially distribute their products to U.S. customers with lower risk. Also, the SEC is actively exploring ways to ease public offerings for tokens, acknowledging that Reg. D or full-on securities registration are impractical fits for tokens of a decentralized or functional blockchain network.

Key legal and regulatory developments

I. Winding Down of SEC Crypto Enforcement

Over the last few years, the SEC has brought headline cases against crypto industry participants, including exchanges like Coinbase, Kraken and Binance, and issuers like Ripple. These cases kept many companies on the crypto sidelines, lest they draw the ire of the SEC. However, some of these cases have now been paused or completely dropped. On February 21, 2025, Coinbase announced that it reached an agreement in principle with the SEC to dismiss their ongoing lawsuit. It is rare for the SEC to dismiss (again, drop completely - not settle) flagship litigation. The SEC’s case against Binance has also been paused, and we could see similar action in the Kraken and Ripple cases.

While critics of the digital asset industry will argue that dropping these cases is a mistake, industry advocates have long argued that these actions were off base from the start. It is likely that the SEC dropped or paused these cases because crypto market structure legislation is coming, leading to practical, mutually agreed solutions for the parties to move forward.

II. SEC Priorities Shifting

The SEC has effectively disbanded its dedicated crypto enforcement unit. In its place, it has installed a broader cybercrimes unit, which includes a crypto focus but also focuses on potential wrongdoing from other emerging technologies like artificial intelligence and even traditional technologies like social media.

Further demonstrating the SEC’s focus on developing new solutions vs. enforcing the status quo, the SEC has created a “crypto task force.” Led by SEC Commissioner Hester Peirce, the task force will develop and recommend rules for crypto, addressing specific priorities such as:

1. Security Status: Defining whether a crypto asset is a security or something else.
2. Jurisdictional Scoping: Identifying which areas fall inside the SECs’ purview and which don’t.
3. Temporary Relief: Developing pathways to compliance for coin or token offerings when an issuer is willing to take responsibility for providing appropriate disclosures.
4. Viable Path for Token Offerings: Easing existing paths to registration, including Regulation A and crowdfunding.
5. Special Purpose Broker Dealer: Exploring updates to the special-purpose broker dealer no-action statement.
6. Custody Solutions for Investment Advisers: Developing a framework in which advisers can appropriately custody client assets themselves or with third parties.
7. Crypto-Lending and Staking: Clarifying whether crypto lending and staking programs are covered by the securities laws.
8. ETPs: Enabling new crypto exchange-traded products and allowing for additional features (e.g. staking and in-kind creations and redemptions).
9. Clearing Agencies and Transfer Agents: Exploring the intersection of crypto, clearing agency and transfer agent rules.
10. Cross-Border Sandbox: Developing a global, cross-border regulatory engagement framework to encourage industry and regulator collaboration.

III. Enabling Banks to Engage with Crypto

The SEC issued guidance in 2022 that restrained banks from custodying crypto. Staff Accounting Bulleting (“SAB”) 121 required the industry to reflect digital assets as both an asset and a liability, effectively forcing banks to maintain additional, and usually impractical, capital reserves. Updated guidance from the SEC this past January - SAB 122 – rescinds this prior guidance. We expect this repeal to allow banks to reengage with digital assets, including custodying them, a major initiative by global custodians and other banks a few years ago.

Additionally, we also could see banks begin again to take crypto companies as customers. In one of the first hearings of the newly formed Senate Banking Committee’s Subcommittee on Digital Assets, lawmakers examined the concept of “debanking” - the term for when a bank denies or closes specific customer accounts for often unexplained risks. In past years, many banks have refused to do business with crypto companies. The debanking period has ended, according to FDIC Acting Chairman Travis Hill, who noted that the prior FDIC approach “contributed to a general perception that the agency was closed for business if institutions are interested in anything related to blockchain or distributed ledger technology.”

IV. Need-to-Know Legislation: Stablecoins

An early favorite for legislation is stablecoins. Generally, stablecoins are digital tokens that are pegged to the U.S. dollar or another fixed currency. If I have one stablecoin, I have (the equivalent to) one U.S. dollar. Stablecoins are increasingly being viewed as in the U.S. national interest because they can effectively expand access to the U.S. dollar. For example, many people globally can’t readily access U.S. dollars – they may not have U.S. bank accounts, or their local bank may not hold sufficient U.S. dollars. With stablecoins, anyone with a phone can hold a digital asset that functions as, and is exchangeable for, a U.S. dollar.

In an area reminiscent of the banking industry, legislation is moving through Congress and could be on President Trump’s desk by mid-2025. The various proposed bills (e.g. Senator Hagerty’s “GENIUS Act”) define key terms like “payment stablecoin,” establish procedures for licensing and issuing stablecoins, implement reserve requirements and standards for stablecoin issuers, and apply different disclosure and registration requirements to issuers based on specific financial thresholds.

V. Need-to-Know Legislation: Market Structure

Fundamental legal and regulatory questions exist with crypto, including the question of if and when a digital asset is a security and which regulator (e.g. the SEC or the CFTC) is in charge. Crypto market structure legislation passed the House of Representatives in 2024, and the current Congress seeks to build upon that prior progress.

The Financial Innovation and Technology for the 21st Century Act (“FIT21”), passed by the House of Representatives in 2024, categorized digital assets into three categories: digital commodities regulated by the CFTC, restricted digital assets regulated by the SEC and payment stablecoins (neither digital commodities nor restricted digital assets). FIT21 would have supplanted the Howey test in determining whether a digital asset is a security by requiring issuers to certify that a digital asset runs on a blockchain that is sufficiently decentralized. Whether its FIT21 or something else, crypto market structure legislation will likely replace Howey providing rules for clearer determinations.

VI. Trump’s Executive Order on Crypto

The first sign that President Trump has prioritized crypto came on January 23, 2025, when he signed an Executive Order titled “Strengthening American Leadership in Digital Financial Technology.” The crypto executive order establishes a working group tasked with recommending a comprehensive regulatory framework for digital assets, including the potential for a national digital asset stockpile. The executive order requires the working group to achieve its objectives in 2025, reflecting the Trump administration’s intent to adopt decisive solutions quickly.

Conclusion

2025 is proving to be a banner year for crypto legislative and regulatory efforts. Stay tuned for more developments, as soon as the next few months. For those interested in engaging more directly, the SEC Commissioner Peirce’s task force is welcoming comments from the industry.