On July 30, 2025, the President's Working Group on Digital Asset Markets released its much anticipated report setting out recommendations concerning the regulation of digital assets in the United States.
The President’s Working Group on Digital Asset Markets is an interagency group that was established as part of the White House’s Executive Order 14178 of January 23, 2025. The Working Group was tasked with submitting a report within 180 days of the Executive Order that recommends regulatory and legislative proposals which advance the policies on digital assets set out in the Executive Order.
The 160-page report (“WG Report”)—published alongside a Fact Sheet—reinforces the administration’s ambitions to develop a regulatory framework that not only supports growth and innovation in the digital assets industry including DeFi, but also explicitly aims to protect individual rights and limit governmental overreach. It positions the US as the “crypto capital of the world”. The WG Report covers a wide range of topics including market structure, banking, payments (including stablecoins), illicit finance, and taxation. The recommendations in the WG Report, directed at specific policymakers and regulatory bodies, effectively form a roadmap for the development of digital asset related legislation, rulemaking and other policy and regulatory initiatives over the coming months. Of course, implementation will introduce complexities and take time, but the WG Report provides a detailed outline of this Administration’s priorities and recommendations.
On the heels of the events of “Crypto Week” during which, among other things, the GENIUS Act was signed into law (see our article here), the WG Report marks yet another major milestone this year in the push for regulatory clarity concerning digital assets in the United States. The WG Report was followed shortly after on July 31, 2025 with a speech by Chairman Paul Atkins of the Securities and Exchange Commission (“SEC”) announcing “Project Crypto”, an initiative to modernize federal securities laws to foster the United States’ leadership in digital asset markets. On August 1, 2025, the Commodity Futures Trading Commission (“CFTC”) announced “Crypto Sprint,” pledging to cooperate with the SEC’s crypto initiative to promote regulatory clarity. It remains to be seen the extent to which the direction being taken by the United States will inform the approach taken by other jurisdictions currently developing their own digital asset regulatory frameworks, such as the UK. In particular, the WG Report takes a distinctly friendly stance towards decentralized finance (“DeFi”) and the use of open public blockchains, and actively advocates for promotion and protection of the rights of individual users to self-custody digital assets and to maintain privacy in digital asset transactions—areas which have, in the past, notoriously been treated with caution by regulators around the world due to associated illicit finance risks.
High-level summary of certain WG Report recommendations
- Digital asset market structure
In the immediate term, the WG Report encourages the SEC and the CFTC to use existing rulemaking powers to introduce exemptions and safe harbors from current rules. This includes a fit-for-purpose exemption from registration under the Securities Act of 1933 for distributions involving digital assets, safe harbors for certain airdrops (free token allocations) from characterization as “sales” or registration exemptions for such airdrops and NFT offerings, and time-limited safe harbors or exemptions for certain digital assets transactions that may be subject to an investment contract because they are not yet tied to a mature, sufficiently decentralized network. It also proposes relief for certain DeFi service providers from the broker-dealer, exchange, and clearing agency registration requirements under the Securities Exchange Act of 1934. In the longer term, the WG Report recommends the SEC and CFTC explore the regulatory treatment of vertically integrated business models and allowing registrants to offer multiple services within a single user interface while implementing appropriate safeguards (e.g. to mitigate conflict of interest risks). The WG Report also encourages the CFTC to consider how rules can be amended to enable blockchain-based derivatives. It further encourages Congress to enact legislation giving the CFTC clear authority over spot markets in non-security digital assets.
It is worth noting that the House of Representatives’ Digital Asset Market Clarity Act of 2025 (the “CLARITY Act”), which represents a foundation for a federal framework addressing digital asset markets, has recently passed the House and continues to progress through the legislative process. On July 22, 2025, the Senate Banking Committee released its discussion draft of a digital asset market structure bill alongside with a request for information. The Senate Agriculture Committee is also expected to release their draft of the bill in the coming weeks.
- Banking and digital assets
The WG Report notes that banks have primarily engaged with digital assets via (i) providing banking services to digital asset market participants, and (ii) facilitating customer access to digital asset markets such as custody, trade execution and settlement. To further facilitate bank engagement with digital asset markets and reduce regulatory uncertainty, the WG Report recommends that the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and Board of Governors of the Federal Reserve System, the primary US federal banking agencies, prioritize providing clarity on the permissibility of certain digital asset activities and on supervisory expectations, such as in relation to custody, use of third parties as sub-custodian, holding stablecoin reserves, tokenization of deposits, and use of permissionless blockchains.
Other recommendations include ensuring that existing and new best practices or guidance on bank risk management processes are technology-neutral, and clarifying the process for eligible institutions to obtain a bank charter or Federal Reserve Bank master account (i.e. eligible entities should not be prohibited from doing so purely because they are engaged in digital-asset related activities)
In respect of capital requirements, the WG Report recommends that the United States should adopt capital requirements for bank digital asset activities that accurately reflect the relevant risks, and should advocate that the Basel Committee on Banking Supervision revisit the international standards on prudential treatment of cryptoasset exposures originally introduced in December 2022.
- Stablecoin and Payments
The WG Report highlights the role of dollar-backed stablecoins in promoting the sovereignty of the US dollar, and recommends that all relevant federal agencies faithfully and expeditiously implement the GENIUS Act in accordance with the powers granted to them. The WG Report further encourages the prohibition of central bank digital currencies (CBDCs) in the United States.
Further recommendations include promoting US private sector leadership in the development of cross-border payments and financial markets technologies, as well as US leadership in establishing international standards for new payment technologies.
- Illicit Finance
In relation to permitted payment stablecoin issuers under the GENIUS Act, the WG Report encourages the US Department of Treasury (“Treasury”) to quickly adopt rules to treat permitted payment stablecoin issues as “financial institutions” under the Bank Secrecy Act (the “BSA”) and to explore, via research and the public comment process, novel methods that regulated financial institutions may use to detect illicit activity involving digital assets.
The WG Report also makes recommendations in relation to the application of AML/CFT rules in the context of DeFi, including that legislation should consider clarifying the actors in the DeFi ecosystem which would have AML/CFT obligations. The WG Report notes that Congress should codify certain principles in legislation which reinforce the importance of US individuals being able to self-custody and transfer digital assets without a financial intermediary, and which clarify how control over an asset can impact the application of BSA obligations (e.g. a software provider that does not maintain total independent control over value is not engaged in “money transmission” for the purposes of the BSA).
The WG Report urges Treasury to enhance public-private information sharing but emphasizes that such efforts must be only used to target illicit finance and terrorist activity. Congress is also encouraged to clarify the extraterritorial application of the BSA to foreign actors whose conduct materially impacts the US digital asset ecosystem. The WG Report makes further recommendations to modernize and streamline reporting requirements, to update Office of Foreign Assets Control’s existing guidance on sanctions, and introduce legislative amendments regarding victim compensation and asset-forfeiture.
- Taxation
The WG Report makes recommendations around guidance that Treasury and the Internal Revenue Service (“IRS”) should publish relating to the tax treatment of digital assets, as well as recommendations to enact new legislation, such as legislation which treats digital assets as a new class of assets subject to modified versions of federal income tax rules applicable to securities or commodities.
The WG Report also recommends the enactment of legislation around the characterization of payment stablecoins for federal income tax purposes, given that such issues are not addressed under the GENIUS Act.
Other recommendations include “possible” guidance or legislation to be introduced or updated by the Treasury and the IRS, such as around timing of income from staking and mining, and around the implementation of the OECD’s Crypto-Asset Reporting Framework (CARF) in the United States.
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