In the early days of the second Trump administration, the federal government has signaled a full-scale change in approach to digital assets. Gary Gensler is no longer the chairman of the Securities and Exchange Commission (SEC), which is now led by Republican Acting Chairman Mark Uyeda. Under Uyeda’s early leadership, the SEC took a significant step to rescind its Staff Accounting Bulletin no. 121 (SAB 121), and could take subsequent actions before SEC Chairman nominee Paul Atkins is confirmed. Additionally, President Trump signed an executive order (EO) on Jan. 23 that establishes the President's Working Group on Digital Asset Markets and issues agencies to review all digital assets regulations.
The SEC is also expected to change its enforcement approach to digital assets and could also move to provide regulatory relief to market participants in the form of new guidance, such as by issuing no-action letters. Over the long term, the SEC will also likely consider carrying out a formal rulemaking to provide more lasting regulatory clarity for market participants to address current legal gray areas in the absence of congressional action.
Digital Assets Executive Order
President Trump’s Jan. 23 digital assets EO establishes the President’s Working Group on Digital Asset Markets within the National Economic Council (NEC), led by White House A.I. and crypto czar David Sacks. The working group will include officials from the Securities and Exchange Commission (SEC), Commodities Futures Trading Commission (CFTC), Treasury Department and Department of Justice (DOJ), among other agencies. The EO tasks the Treasury Department, DOJ, SEC and all other relevant agencies to identify all regulations, guidance and orders that impact the digital asset sectors. Within 60 days of the issuance of the order, each agency must submit recommendations on whether regulations under their purview should be rescinded or modified.
The working group is also required to propose a federal regulatory framework for digital assets, including stablecoins, with consideration on market structure, oversight, risk management and consumer protection. The EO also ordered the working group to evaluate the potential creation and maintenance of a national digital asset stockpile and is also prohibited from taking any action to establish, issue or promote a Central Bank Digital Currency (CBDC). The EO also includes provisions that revoke President Biden’s EO 14067 on the responsible development of digital assets, which required the Treasury Department to issue a wide-ranging request for comment (RFC) on digital assets. The EO also rescinds the Treasury Department’s 2022 Framework for International Engagement on Digital Assets.
SAB 121
The SEC, under the new leadership of Acting Chairman Uyeda, rescindedSAB 121 on Jan. 23, which provided interpretive guidance from SEC staff for the accounting treatment of digital assets held in custody by a company on behalf of its customers. Specifically, SAB 121 directed these firms to record these assets on their balance sheets at fair value as a liability, as well as a corresponding asset. Since taking effect in March 2022, SAB 121 has created major challenges for banks and other publicly traded depository institutions seeking to provide crypto-related services. The standard approach to accounting generally treats custodied assets held by banks as off-balance sheet assets. As a result, the balance sheet impact of holding customer crypto assets now has the effect of significantly increasing the regulatory capital and liquidity requirements these institutions must meet, making it prohibitively expensive in many cases. SAB 121 is guidance and not a formal rule, which allowed Uyeda to revoke the bulletin almost immediately after assuming the acting chairman position.
In the 118th Congress, the House passed a Congressional Review Act (CRA) resolution (H.J.Res.109) with support from nearly two dozen Democrats, and the Senate passed the CRA with support from 11 Democrats, including Majority Leader Chuck Schumer (D-NY). President Joe Biden vetoed the CRA resolution and the House failed to override President Biden’s veto.
SEC Outlook
Former SEC Chairman Gary Gensler resigned from the commission on Jan. 20, and Democratic Commissioner Jaime Lizárraga resigned on Jan. 17, representing a major change in the commission’s partisan composition. President Trump officially nominated Paul Atkins to fill Gensler’s vacant seat, ensuring that the lone Democratic commissioner, Caroline Crenshaw, will remain on the commission for now. Crenshaw has served on the commission on an acting basis since June 2024, when her previous term expired. She could serve on the commission until the end of 2025 or until Trump appoints another Democrat for her seat.
At the end of the 118th Congress, former Senate Banking Committee Chairman Sherrod Brown (D-OH) attempted to advance the confirmation of SEC Commissioner Crenshaw for a second five-year term on the commission, though the last-minute push failed. Once Atkins is confirmed, the five-member commission is expected to comprise three Republicans and one Democrat. For Brownstein’s analysis of Atkins’ expected priorities, click here.
The SEC also moved to establish a “crypto task force” on Jan. 23 that will be responsible for developing a digital assets regulatory framework. The task force will be led by SEC Commissioner Hester Peirce, an advocate for a digital asset regulatory framework. The press release states that the task force will provide technical assistance to Congress and coordinate policy with federal agencies, including the CFTC.
Next Steps
SAB 121 repeal signals that the SEC could undo other guidance or issue no-action letters while Acting Chairman Uyeda is serving in his temporary role. Once Atkins is confirmed, the SEC may promulgate new regulations to clarify the definition of digital assets as it relates to existing laws. The SEC is also expected to adjust its enforcement posture on digital assets and move away from its “regulation by enforcement” approach.
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