President Trump’s First Week in Office is a Momentous One for Digital Assets: An Executive Order, Repeal of SAB 121 and a Clear Statement on Trump Administration Support for Comprehensive Regulatory Reform

What This Means for Banks, Financial Services and the Digital Assets Sector

Just four days after his inauguration, President Donald Trump has initiated a fundamental shift in federal policy on digital assets with a series of actions that set the stage for the establishment of a regulatory regime for digital assets. These actions signal that reforming digital assets regulation will be a top priority for the new administration.

Most importantly, on January 23, 2025, President Trump issued an Executive Order – titled “Strengthening American Leadership in Digital Financial Technology” (the “Executive Order”) – that sets forth the administration’s policies on digital assets, and establishes a process for the development of legislation and regulatory reforms to advance those policies. The executive order also explicitly revokes Executive Order 14067 (Ensuring Responsible Development of Digital Assets) (“Executive Order 14067”) issued by President Joe Biden.

Also on January 23, the Securities and Exchange Commission (SEC) rescinded its Staff Accounting Bulletin No. 121, which required companies that hold custody of crypto-assets on behalf of users to account for those crypto assets as liabilities on their balance sheets. Since its issuance in March 2022, the effect of SAB 121 has been to largely prevent banks and other financial services businesses regulated by the SEC from custodying crypto assets for customers and, by extension, limited the crypto-asset services these businesses could provide.  

In addition, Acting SEC Chair Mark Uyeda also established a new crypto task force led by SEC Commissioner Hester Peirce, which is tasked with developing a comprehensive and clear regulatory framework for crypto assets.

In this Legal Update, we discuss each of these actions, how they contrast with the Biden Administration’s policies on digital assets, and what we can expect next from the Trump Administration on digital assets regulatory and legislative reform.

President Trump’s Executive Order on Digital Assets and Establishment of Digital Assets Reform as an Administration Priority

President Trump’s Executive Order establishes that it is the administration’s policy to “support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.” This contrasts with President Biden’s Executive Order 14067 and the related Treasury Department framework, which focused on highlighting and protecting against the risks digital assets posed to consumers, investors, businesses, systemic risk and national security.

The Executive Order describes this policy in several ways.

• First, it highlights the Administration’s policy of promoting access to public blockchains by individual citizens and private-sector entities. Other key Administration policies include providing regulatory clarity and certainty and well-defined jurisdictional regulatory boundaries. Notably, the Executive Order emphasizes that access to public blockchain networks must be free of “unlawful censorship.”

• In language that could cover banks and other non-digital asset companies, the Executive Order states the Administration will protect and promote the “fair and open access to the banking system for all law-abiding individuals, citizens and private sector entities.”

• The Executive Order also explicitly establishes as administration policy the protection of the sovereignty of the US dollar, including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide.

• In addition, the Executive Order states that the Administration favors “technology-neutral regulations, frameworks that account for emerging technologies, and transparent decision making.”

• The Executive Order also explicitly promotes a number of specific digital assets activities that have been the subject of federal enforcement actions or regulatory restrictions:
• access and use of open public blockchain networks for lawful purposes “without persecution;”
• development and deployment of blockchain software;
• participation in mining and validating activities;
• transacting with other persons without unlawful censorship; and
• self-custody of digital assets.

• Finally, the Executive Order prohibits federal agencies from taking actions to promote Central Bank Digital Currencies (CBDCs), which the Executive Order describes as threats to the stability of the financial system, individual privacy, and the sovereignty of the United States. However, it does not address or foreclose the adoption of stablecoins issued by private sector entities or decentralized digital currencies.

Going Forward: The President’s Working Group on Digital Asset Markets and a Path to Digital Assets Legislation

The Executive Order establishes the President's Working Group on Digital Asset Markets (the “Working Group”), which will be chaired by Special Advisor for AI and Crypto David Sacks, and will include the heads of 11 executive departments and agencies, including the secretaries of Treasury, Commerce and Homeland Security, the Attorney General, and the chairs of the SEC and CFTC.  The Working Group does not explicitly include the federal banking regulators (the Federal Reserve, OCC and FDIC). However, the Chair is authorized to include them to the extent it these agencies’ expertise is needed. 

The Working Group’s mandate is to propose a federal regulatory framework governing the issuance and operation of digital assets—including stablecoins—in the United States, considering provisions for market structure, oversight, consumer protection, and risk management. In doing so, the Working Group is tasked with identifying and reviewing all existing digital assets regulations, guidance, orders, or other items that affect the digital asset sector. The Working Group’s mandate also includes evaluating the potential creation and maintenance of a national digital asset stockpile and proposing criteria for establishing such a stockpile, which may include cryptocurrencies seized by federal law enforcement.

The Working Group will also hold public hearings and receive individual expertise from leaders in digital assets and digital markets, and consult with the National Security Council on issues affecting national security. We expect the Working Group’s report to provide a set of principles and concrete recommendations for digital assets legislation.

Key Dates from the Executive Order and Deadlines for the Working Group

February 22, 2025: Within 30 days of the date of the Executive Order, the heads of the agencies that comprise the Working Group must identify all existing digital assets regulations, guidance, orders, or other items that affect the digital asset sector.

March 24, 2025: Within 60 days of the date of the Executive Order, each agency must submit regulatory recommendations to the Chair of the Working Group.

July 22, 2025: Within 180 days of the date of the Executive Order, the Working Group must submit a report to the President, with recommendations for regulatory and legislative proposals that are consistent with the Executive Order.

The SEC’s Repeal of SAB 121 and Formation of its Crypto Task Force

SEC Acting Chair Uyeda moved quickly following his appointment to the Acting Chair position. The rescission of SAB 121 removes a significant restriction on banks and other companies holding custody of crypto-assets on behalf of users. SAB 121 had previously been the subject of a bipartisan attempt in Congress to repeal it in May 2024 that was vetoed by President Biden.

Staff Accounting Bulletin No. 122, which rescinds SAB 121, goes into effect on the date it is published in the Federal Register (typically several business days following announcement). SAB 122 states that companies that previously followed SAB 121 and custody crypto-assets for users will need to determine whether to continue to recognize a liability on their balance sheets related to the risk of loss under the custodial obligations. The SEC’s notice also states that the rescission of SAB 121 should be effective on a fully retrospective basis in their financial statements for annual periods beginning after December 15, 2024.    

Perhaps most importantly, the notice states that entities may elect to restate any earlier interim or annual financial statements to give effect to the rescission of SAB 121. SAB 122 also states that companies that elect to restate financial statements for earlier periods should provide clear disclosure of the effects of a change in accounting principle upon initial application of the rescission.

Separately, Acting Chair Uyeda named Commissioner Hester Peirce to lead a newly created crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets. Given the overlapping mandates of the task force and the Working Group, we expect close coordination between these groups.  An open question for the task force will be the role of the SEC’s Office of Strategic Hub for Innovation and Financial Technology (FinHub), given that some of the task force's stated responsibilities include engagement that falls under FinHub jurisdiction.

What do These Actions Mean for Digital Assets and Financial Services?

The Executive Order is a Fundamental Shift in Policy. The Executive Order is a significant shift in the federal government's approach to digital assets and financial technology, from a restrictive stance under the previous administration to a supportive one under the current administration. The Executive Order will very likely result in the removal of regulatory measures adopted during the Biden administration that have impeded the development of digital asset markets. The repeal of SAB 121 is just the first step.

Potentially most significantly, the Executive Order signals to Congress that President Trump places a priority on the passage of digital asset legislation. During the last Congress, digital asset legislation was impeded by former President Biden’s reservations, if not outright opposition. Now it appears that the stars are aligning for Congress to pass legislation on digital asset market structure and on stablecoins. If Congress does so, we expect President Trump to sign such legislation into law.

The Working Group will be a Key Component of Implementing Administration Digital Assets Policy. The timeline and explicit milestones for the Working Group call for recommendations on regulatory and legislative proposals to be delivered within six months. The Executive Order calls for these proposals to focus on the issuance and operation of digital assets—including stablecoins—in the United States and related provisions for market structure, oversight, consumer protection, and risk management. While a national digital asset stockpile is also mentioned in the Executive Order, the Executive Order does not seek to create a strategic digital asset reserve at this time (as some market participants had speculated it might).

Promotion and Validation of Specific Digital Assets Activities. Many of the activities specifically noted in the Executive Order as policy principles or promoted activities are often cited by the digital assets sector as activities that should not be subject to onerous regulation simply because they utilize blockchain technology – i.e., technology-agnostic or technology-neutral regulations. In addition, some of these activities have also allegedly been the targets of “Chokepoint 2.0,” a series of actions taken by federal banking agencies during the Biden Administration that resulted in banks restricting services to individuals and companies that were active in the digital assets sector.

Expect Federal Agency Actions to Remove Regulatory Impediments to Digital Assets Activities. The repeal of SAB 121 is a significant step toward a broader array of digital assets services being offered by many traditional financial services companies. As the Trump nominees to the financial regulators eventually take their positions, we expect to see the agencies take similar actions. 

For example, in November 2021 the Office of the Comptroller of the Currency issued Interpretive Letter 1179, which essentially required that national banks and federal savings associations obtain written approval from the OCC to engage in cryptocurrency activities. The Federal Reserve and FDIC largely adopted the OCC’s approach, and the Federal Reserve even adopted a policy statement that was designed to foreclose certain cryptocurrency activities by banks. The Executive Order explicitly repudiates these Biden-era policies, and we can expect to see them reversed.

CBDCs are DOA. One notable departure from the Administration’s generally supportive approach to digital assets overall is the prohibition on any activity or development related to a CBDC. This policy had been the subject of legislative proposals in the previous Congress and is generally consistent with views expressed by numerous Republican lawmakers. In our view, the Executive Order will effectively foreclose any further work on a US dollar CBDC by the federal government—including by federal agencies—at this time.