New Administration Outlook: Trump Administration Transforms U.S. Policy on Digital Assets

The Trump Administration has embarked on a fundamental shift on how the United States approaches digital assets—in marked contrast with the Biden Administration's policies—likely changing the prospects of the crypto market in the United States for the foreseeable future.

The SEC Sets Up a Crypto Task Force and Rescinds SAB 121

First, the SEC rescinded Staff Accounting Bulletin 121 ("SAB 121") which effectively prevented banks from serving as custodians of digital assets, and thus limiting liquidity flowing into digital asset funds. SAB 121 required that banks acting as "qualified custodians" record on their balance sheets a liability in an amount equal to the fair value of the digital assets they were holding in custody along with a corresponding asset for the same amount. This significantly curbed the ability of banks to develop and bring to market at scale certain digital assets products and services.

The rule was controversial and was even rejected under the Congressional Review Act by both houses of Congress, though it was saved by President Biden's veto.

SAB 121's revocation marks new openness to cryptocurrencies and their innovative possibilities. This came hard on the heels of the January 21, 2025 announcement by Acting SEC Chair Mark Uyeda of the establishment of a Crypto Task Force to be led by Commissioner Hester Peirce which will "draw clear regulatory lines, provide realistic paths to registration, sensible disclosure frameworks, and deploy enforcement resources judiciously." When it comes to crypto, this is a brand new SEC outlook, one that is the complete opposite of the former approach, which Commissioner Peirce once described as that of "a paternalistic and lazy regulator" and one that "do[es] not initiate a public process to develop a workable registration process that provides valuable information to investors, just shut[s] it down."

Presidential Optimism Regarding Digital Assets

While the SEC's new course is welcome and substantial, the broad and powerful series of actions mandated by President Trump's Executive Order titled "Strengthening American Leadership In Digital Financial Technology" (the "Trump EO") are far more significant. They set forth a forward-looking and optimistic view of digital assets and their potential within the U.S. financial ecosystem. Assuming all the steps described in the Trump EO are fulfilled, the outcome will be a comprehensive and practical regulatory framework for crypto in the U.S. which fosters innovation while respecting the need for safety, disclosures, and effective oversight.

Context and scope of change

To understand the scope of the change it represents, it is useful to quickly review for contrast what it revoked, President Biden's Executive Order 14067: "Ensuring Responsible Development of Digital Assets," issued March 9, 2022 (the "Biden EO").

The Biden EO initiated a "whole of government" approach that was generally hostile to digital assets and blockchain. It called for a number of reports, many of which were issued several months later. Reports were expected from the SEC, CFTC, Federal Reserve, FDIC, OCC, Treasury, DOJ and Commerce, as well as the State Department, the Department of Energy, the Department of Labor, and more.[1]

The Biden EO, as well as the reports, were for the most part negative about digital assets, though some viewed them as strengthening consumer and AML protections. The provisions of the Biden EO emphasized the risks and potential illegal uses of digital assets, with only passing references to their potential benefits. The EO discussed digital assets primarily in terms of money laundering, ransomware and other cybercrime, narcotics and human trafficking, systemic financial risk, climate risk, market and national security risk, and risk of creating financial inequities. The laundry list strongly implied that crypto assets were dangerous and to be avoided. It concluded that these risks must be addressed "through regulation, oversight, law-enforcement, action, or use of other United States government authorities." It did nothing to encourage the development of digital assets.

Remarkably, the Biden EO also called for coordination and communication between and among 24 separate departments and agencies of the federal government "and other federal agencies." It also directed coordination with the G7, G10, FATF, and FSB.

No doubt there are extensive records of such meetings which could provide considerable fodder for financial historians. One hopes that in the name of transparency they soon will be made public. However, to our knowledge, none of that considerable effort produced any guidance to the digital asset industry as to how it might develop and market products in a safe and complaint manner or meet the standards being set by federal financial regulators. Developers and investors were left unguided, but with an unmistakable view that the government most definitely was not there to help.

The Trump EO

Section 3 of the Trump EO Executive Order not only revokes the Biden EO but "all policies, directives, and guidance issued pursuant to [the Biden EO] … [are] rescinded, or shall be rescinded … as appropriate, to the extent they are inconsistent with the provisions of this Order" and that that the Secretary of the Treasury "shall take all appropriate measures" to ensure compliance with the Trump EO. Lest there be any doubt, the Fact Sheet accompanying the Trump EO directs departments and agencies to make recommendations "on any regulations or other agency actions affecting the digital assets sector that should be rescinded or modified."

Section 4 of the Trump EO also establishes within the National Economic Council (headed by Kevin Hassett) the "President's Working Group on Digital Asset Markets" (the "Working Group") to be chaired by the newly appointed "Crypto Czar," David Sacks.[2]

There are eleven members of the Working Group, composed of various financial (Treasury, SEC, and CFTC), legal and national security departments and advisors, but notably omits the federal banking agencies (Federal Reserve, OCC, and FDIC) and the CFPB as the federal consumer protection agency. The chair nevertheless may invite heads of other executive departments and agencies to attend meetings of the Working Group. The exclusion of the federal prudential and consumer regulators from a "seat at the table" may be an indication that the Trump Administration considers their prior activities related to the blockage of crypto development and innovation to be particularly troubling—notably, OCC Interpretive Letter 1179, which introduced a pre-clearance framework that was adopted, in substance, by the Federal Reserve and the FDIC.

Working Group's mandate

The Working Group is tasked with producing significant output that should pave the way for a comprehensive body of regulation for digital assets and blockchain activity adhering to an ambitious schedule:

• February 2025. Within 30 days, Treasury, DOJ and the SEC, as well as other relevant agencies must identify all regulations, guidance, documents, orders, or other items that affect the digital asset sector. (This will necessarily include federal banking agencies, even though they are not in the Working Group.)
• March 2025. Within 60 days, each agency must submit to the chair of the Working Group recommendations with respect to whether each identified regulation, guidance document, order, or other item should be rescinded or modified or for items other than regulations, adopted in a regulation. (Past collaboration between Commissioner Peirce at the SEC and Acting Chairman Pham at the CFTC would appear to bode well for a collaborative approach relating to the form and function of trading markets for crypto.)
• July 2025. Within 180 days, the Working Group must submit a report to the President (through the Assistant to the President for National Economic Policy) that recommends regulatory and legislative proposals, that "advance the policies established in this Order." In particular, the report must focus on the following:
  • A proposed federal regulatory framework, governing the issuance and operation of digital assets, including stablecoins
  • Provisions for market structure, oversight, consumer protection, and risk management.

The Working Group must also evaluate the potential creation and maintenance of a "national digital asset stockpile" as we described in our prior advisory, though arguably broader as it would appear to include digital assets other than just bitcoin.

Finally, to ensure appropriate transparency, the Working Group is to hold public hearings and receive individual expertise from leaders in digital assets and digital markets (which could involve the expected Crypto Advisory Council).

Abandonment of a U.S. CBDC

Finally, the Biden EO had focused considerably on the potential development of a Central Bank Digital Currency (CBDC) and encouraged the study of that option and its potential functionality. The Trump EO ended that body of work by expressly "prohibiting the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States."

However, the Trump EO very much encouraged the development of dollar-backed stablecoins, perhaps suggesting that there is little need for a U.S. CBDC as long as there are a substantial number of dollar-backed stablecoins originating from U.S. issuers.

Our Initial Assessment

The EO sets in motion profound changes that will shift the emphasis from the cautionary and opaque process of the Biden Administration to one that is receptive to the possibility of digital asset and blockchain innovation, while taking advantage of the controls, compliance and other disclosure, monitoring and oversight measures developed privately by the industry over the last four years. This is a very sharp course alteration which we believe will be marked by the following changes:

1. The goal is a comprehensive regulatory structure around the definitions of digital assets, how they can be marketed and sold, what needs to be disclosed about them, how the market should be structured, how liquidity can enter that market, how capital should be held in connection with those risks.
2. Jurisdictional boundaries will be defined, mostly between the CFTC and the SEC. Indeed, the SEC's new Crypto Task Force may preserve some of its jurisdictional territory through tangible evidence of a friendliness toward crypto. Interactions with the federal banking agencies and the CFPB will likely need to be clarified.
3. It is likely that this will profoundly influence existing litigation. It makes little sense to continue litigation related to how digital assets should be defined as securities or otherwise, and how they can be sold and marketed, when a regulatory structure that will resolve those questions is pending.
4. The U.S. will develop its regulatory framework with little international coordination.
5. The U.S. crypto markets are likely to benefit from this future clarity and stability and will soon be on equal footing with, for now, more highly developed crypto markets in the EU and Asia Pacific regions.
6. The issuance of stablecoins is likely to expand and benefit from regulation "promoting and protecting the sovereignty of the United States dollar including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide." Stablecoins are expected to be broadly accepted and institutionalized in the near term.
7. The Trump EO specifically indicates that it will protect and promote the individual and the ability of individual citizens to participate in mining and validating, perhaps ending any threat that those who participate in the validation of digital asset transactions are engaging in the purchase or sale of securities.
8. Noting that the digital asset industry "plays a crucial role in innovation and economic development in the United States," there will be an open door for the development of regulatory sandboxes, the use of exemptive authorities and no action letters, etc. to promote responsible innovation, not unlike the actions which led to the development of Regulation ATS and the trading of stocks over the internet.
9. It appears that this puts to rest once and for all the issue of whether questions surrounding crypto trigger the Major Questions Doctrine. The direction and structure of the Trump EO should be sufficient to allow defendants in ongoing SEC actions to argue for a stay so that regulators can seek any additional permission from Congress required by the doctrine.
10. There should be further support for the immediate end of the debanking as a result of language in Section 1(a)(iii) of the Trump EO stating that the Administration will support the responsible growth and use of digital assets by "protecting and promoting fair and open access to banking services for all law abiding individual citizens and private sector entities alike," as recently reiterated in presidential remarks. While neither the text of the Trump EO nor the president's recent comments to the World Economic Forum precisely say "end debanking immediately," one does not have to read too much between the lines.

Conclusion

The Trump Administration's pivot has substantially changed direction for crypto and digital assets. We expect more to come.

Industry should be able to move beyond its previous interactions with hostile enforcers and uncommunicative regulators to a period of more productive clarity and reasonable regulation to concentrate on building secure, efficient, fast, reliable, and transparent new financial tools that will accelerate innovation and benefit business and consumers in safe, responsible, and legal ways.

If you have questions about the policy priorities and potential impact of the Trump Administration's actions on your crypto activities, plans, or pending matters before a federal financial agency or court, please contact the authors or your DWT attorney contact.