New Report Highlights U.S. Digital Asset Regulation Strategy
The President’s Working Group on Digital Asset Markets released a new report titled *Strengthening American Leadership in Digital Financial Technology* on July 30. This document, stemming from January’s Executive Order 14178, presents a comprehensive set of recommendations aimed at regulating digital assets and blockchain technology across the United States. The report raises several important questions regarding its impact on businesses, financial institutions, and investors.
Purpose and Key Focus of the Report
This report addresses the working group’s mission to suggest regulatory and legislative measures that promote the responsible advancement of digital assets and blockchain technologies. While it does not implement immediate regulatory changes, it is expected that significant federal agencies will act on proposals that don’t necessitate new legislation. Key priorities outlined in the report include: safeguarding individuals’ and businesses’ rights to utilize open blockchain networks and manage their own digital assets; enhancing the U.S. dollar’s global standing through stablecoin support; prohibiting the creation or adoption of central bank digital currencies (CBDCs) within the country; clarifying legal aspects of digital asset ownership and self-custody; ensuring equitable treatment of digital asset firms by banks and regulators; and bolstering U.S. leadership in digital asset innovation, payment systems, and anti-financing of illicit activities.
Proposed Structure for Digital Asset Markets
The report introduces a classification system that divides digital assets into three categories: security tokens regulated by the SEC, commodity tokens overseen by the CFTC, and commercial or consumer-use tokens such as stablecoins and utility tokens. This classification aims to minimize regulatory overlaps and opportunities for arbitrage. Additionally, the report recommends specific exemptions from securities registration for digital asset distributions, including safe harbors for emerging projects that are not yet fully operational or decentralized. It advocates for the immediate trading of non-security digital assets linked to investment contracts on non-SEC platforms post-issuance, and suggests relief from broker-dealer, exchange, and clearing agency registration requirements for selected decentralized finance (DeFi) service providers. The report also calls for a modernization of definitions and regulations concerning exchanges, transfer agents, and self-hosted wallet providers, alongside coordinated rule-making efforts between the SEC and CFTC.
Immediate Recommendations for Market Participants and Regulators
Among the immediate actions suggested are: creating exemptions from registration requirements for digital asset offerings, including safe harbors for early-stage projects as well as clear guidelines for airdrops and decentralized network rewards; permitting the trading of non-security digital assets on non-SEC platforms following their issuance; updating the definition of “exchange facility” to support tokenized securities and digital assets; and clarifying the registration obligations for wallet providers as broker-dealers. Furthermore, the report emphasizes the need to provide guidance on how investment firms and advisors can securely hold digital assets classified as securities, and discusses the role of state-chartered trusts as potential qualified custodians or banks. The CFTC is also urged to define how digital assets should be categorized and traded as commodities, which includes rules surrounding leveraged trades, actual delivery, and customer identification.
Coordination Between the SEC and CFTC
The report advocates for improved collaboration between the SEC and CFTC, encouraging them to synchronize their rule-making and public commenting processes. It also suggests the establishment of regulatory sandboxes or safe harbors, complete with clearly defined eligibility criteria and exit strategies, and considers the introduction of a special category for qualified participants to trade digital asset derivatives via regulated intermediaries.
Long-Term Recommendations for Market Structure
In terms of long-term strategy, the report recommends a unified user interface that allows digital asset companies to conduct trading, custody, and brokerage services under one platform, backed by robust safeguards and transparent disclosures. It proposes updates to CFTC rules to facilitate blockchain-based derivatives, inclusive of requirements for clearing, reporting, and margin, even in environments lacking intermediaries. If legislative action from Congress is stalled, the SEC and CFTC are encouraged to utilize their existing powers to provide regulatory clarity and promote responsible innovation.
Market Structure Legislation Insights
The report identifies the Digital Asset Market Clarity Act of 2025 (CLARITY) as a critical framework for market structure, advocating for a shared oversight model between the SEC and CFTC, the protection of self-custody rights, and the facilitation of efficient trading and DeFi. It calls on Congress to ensure that federal laws take precedence over state laws for firms registered with the SEC and CFTC, and to establish clear and efficient licensing and reporting regulations for digital asset intermediaries.
Focus on DeFi and Innovation
In addressing DeFi, the report suggests regulations that are grounded in the actual control over assets, the capacity to modify software, and the level of centralization. It recommends tailored guidelines for DeFi reflecting its distinct characteristics instead of applying conventional financial regulations by default, while also emphasizing the necessity to prevent the structuring of products solely to evade legal responsibilities.
Accounting Recommendations Overview
The Financial Accounting Standards Board (FASB) has provided guidance on the fair value measurement of digital assets. The report encourages FASB to gather further input on critical issues such as: when to recognize or remove digital assets from financial statements; how to account for tokens created and issued by businesses; the classification of stablecoins as cash equivalents; and accounting for tokens that offer utility or access but lack explicit legal rights. It stresses the importance of updating accounting and auditing standards as the use of digital assets continues to expand.
Banking and Digital Asset Activity Changes
The report outlines the need for clear directives regarding permissible digital asset activities for banks, including custody, collaboration with third-party providers, management of stablecoin reserves, and involvement in pilot programs. It emphasizes that all types of banks should be treated fairly, with a technology-neutral approach in supervision. Additionally, it calls for transparent and timely processes for securing charters, insurance, and Reserve Bank master accounts, including automatic approvals if deadlines are not met, barring extraordinary circumstances. The report advocates for risk-based capital and liquidity requirements for digital asset activities that align with international standards and the elimination of outdated restrictions affecting state-chartered banks, along with consistent training for examiners.
Stablecoins and Payment Systems
The report expresses support for the GENIUS Act, which mandates that U.S. dollar-backed stablecoins be fully backed by high-quality, liquid assets, redeemable at a 1:1 ratio for cash. It requires monthly disclosures of reserves and prohibits misleading assertions regarding government backing. Furthermore, stablecoin issuers must obtain licenses in the U.S. or comply with equivalent foreign standards. The report prioritizes the claims of stablecoin holders during insolvency and mandates that custodians segregate reserves. It clarifies that U.S.-licensed payment stablecoins are not classified as securities or commodities, imposes stringent Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) requirements on issuers—including foreign ones serving U.S. customers—and promotes competition and innovation in payment systems while prohibiting government-issued CBDCs in favor of private sector solutions.
Addressing Illicit Finance
The report advocates for the swift implementation of the GENIUS Act’s AML regulations for stablecoin issuers and proposes updated guidance from FinCEN for digital assets, including new categories for digital asset financial institutions. It calls for legislation to define the conditions under which U.S. AML regulations apply to foreign entities, while ensuring that Americans retain the right to self-custody their digital assets and clarifying that software providers without full control do not qualify as money transmitters. Enhanced information sharing between digital asset and traditional financial institutions is encouraged, along with greater participation in FinCEN’s information-sharing initiatives. New regulations should allow the Treasury to block or condition specific digital asset transfers linked to illicit activities, even outside conventional banking settings. The report also highlights the need for updates to victim compensation and asset forfeiture laws concerning digital assets, as well as expanded anti-tipping off and theft laws applicable to digital asset businesses. Lastly, it suggests adopting flexible, principles-based cybersecurity standards and improving the sharing of information regarding cyber threats.
Tax Recommendation Highlights
The report emphasizes the necessity for guidance on the taxation of digital asset transactions, encompassing staking, mining, and wrapping. It proposes treating digital assets as a distinct asset class for tax purposes, subject to rules similar to those governing stocks or commodities. Clarifications regarding the tax implications of stablecoins—including their classification as debt—are also recommended, along with updates to address wash sale and anti-bearer bond regulations. It advocates for the application of wash sale rules to digital assets (excluding stablecoins) and revisions to broker reporting requirements. The report suggests treating loans of actively traded digital assets akin to securities loans and provides guidance for minor digital asset receipts (such as airdrops, staking, and mining), while updating rules concerning the timing of income reporting from these activities. It also emphasizes the need for reporting on foreign digital asset accounts and streamlining reporting forms for the IRS and FinCEN, ensuring that broker and business reporting requirements are consistent and not overly burdensome.
Conclusion and Next Steps
The White House’s digital asset roadmap indicates a transition towards clearer and more supportive regulations governing digital assets and blockchain technology in the United States. Federal agencies, including the Treasury, SEC, CFTC, OCC, and FDIC, are anticipated to act promptly on the recommendations put forth in the report. Additionally, Congress may explore new legislation to further clarify the digital asset market structure, tax treatment, and measures against illicit finance. Companies are advised to reassess their compliance, risk management, and reporting strategies in light of these recommendations and to remain vigilant for any further regulatory and legislative changes.
