Date

February 26, 2025

Introduction

With the inauguration of the Trump administration on January 20, 2025, the Crypto/Blockchain industry is entering a major turning point.

This report covers key regulatory trends in the U.S. that impact the Crypto/Blockchain industry.

Major Developments from Inauguration to Mid-February

The major developments until mid-February are as follows:

January 21: Establishment of the Cryptocurrency Task Force by the U.S. Securities and Exchange Commission (SEC)
January 23: SEC's repeal of SAB 121 (U.S. accounting standards)

Changed accounting standards for custodial services of crypto assets by banks and other institutions

January 23: Signing of the Executive Order "Strengthening American Leadership in Digital Financial Technology"

Revocation of President Biden's Executive Order 14067 and related Treasury Department digital asset framework
Issuing a clear prohibition on CBDC (Central Bank Digital Currency)

February 4: Announcement of the establishment of a "Bipartisan Cryptocurrency Committee" by key members of the Senate and House

Additionally, while no important milestones have occurred during this period, the Financial Innovation and Technology for the 21st Century Act (FIT21) is a very important related bill.

This bill is crucial for clearly exempting certain crypto assets from securities regulations, but after passing the House last year, the status of its consideration in the Senate and prospects for passage remained unclear.

With the inauguration of the new administration, there are expectations that deliberation on this bill will also be driven forward. The bipartisan cryptocurrency committee mentioned earlier also plans to make this bill an important subject for consideration.

Key Issues in the Trump Administration

Based on the administration's actions so far, the particularly noteworthy issues related to Crypto/Blockchain are as follows:

Exempting crypto assets from securities classification under the FIT21 bill
CBDC policy (January 23 Executive Order revoking Biden’s Executive Order 14067)
Establishment of a regulatory framework for digital assets (Will concentrate on Stablecoin Act, Digital Asset Framework Act)

Blockchain Token Exclusion from Securities Classification

The debate over whether cryptocurrency transactions should fall under U.S. securities regulations has been one of the most significant issues in the Crypto industry in recent years. Currently, the lack of clarity on this point has led to lawsuits between the SEC and cryptocurrency trading businesses.

Here, we will introduce the framework of U.S. securities regulations, the regulatory policy under the Biden administration, and the differences with the policy under the current Trump administration.

Basic Framework of U.S. Securities Regulations

U.S. securities regulations are structured as follows:

Securities Subject to Regulation	Emphasizes substance, broadly regulating transactions with securities like characteristics regardless of their nominal nature. (Not a limited enumeration method like Japanese law.)
Targeted Entities	Not limited to corporations, but broadly includes parties that are subjects of investment contracts. This includes collective investments using partnerships.
Main Regulatory Content	・Registration obligations ・Mandatory (information) disclosure ・Business regulations (solicitation regulations, financial regulations, fee regulations, etc.)

Securities-related businesses are regulated under two frameworks:

Market regulations, which oversee securities issuers and contract intermediaries.
Business regulations, which govern securities trading and transactions.

With a scheme that in principle has no entry regulations, allowing anyone to enter the market as long as they register. (However, there may be banking law regulations for banks)

For securities as well, the emphasis is on substantive evaluation, and in principle there are no restrictions on what kind of securities to issue in terms of external form, which can also be considered a scheme that emphasizes open market competition. (However, there is a simultaneous need to fulfill obligations such as information disclosure obligations under various regulations, solicitation regulations, and financial regulations such as capital reserve funds)

Abstract Definition of "Securities" to Promote Open Market Competition

The American legal definition of securities is not a limited enumeration method; only abstract definitions are in place, and when the securities nature becomes an issue, it takes the form of contesting its validity in court. (Although there is an enumeration of representative examples within the law, this is not considered a limited enumeration but rather an illustration)

Therefore, when the securities nature of a particular transaction becomes an issue, the court will roughly make a determination as follows:

First, items with examples in the law are presumed to be securities. (In this case, since it is only a "presumption," counter-evidence is possible, and the party denying the securities nature bears the burden of proof)
Next, if there are no examples, it is determined by the Howey test derived from the Howey case. The criteria evaluated here are the four elements: ① investment of money, ② common enterprise, ③ expectation of profits, and ④ efforts of others (primarily bringing returns)

Securities Nature of Blockchain Tokens

From the previous discussion, you may understand that in America, whether something is a security is determined only after individual case-by-case examination. Applying this to the token economy of blockchain, it becomes clear that whether a blockchain token has securities characteristics is not uniformly determined but is judged on a case-by-case basis.

And since blockchain tokens are neither illustrated nor defined in current law, they must be evaluated using the aforementioned determination criteria. In this case, since there is no applicable example in the former, it will be evaluated according to the Howey test, but:

① investment of money, ② common enterprise, ③ expectation of profits, ④ efforts of others

As you can see that many blockchain token transactions could be judged to meet these four requirements.

In fact, related to this issue, lawsuits have been filed in the past by investors against Coinbase and Ripple, and for Coinbase, litigation is still ongoing. (However, with the new administration now considering new systems, there have been recent postponements of court dates)

Additionally, due to the ambiguity of the securities classification criteria, some blockchain projects fearful of becoming regulatory targets have taken measures to ostensibly prohibit access from America (such as explicitly stating so in their terms or implementing IP blocking), which is actually being done in the blockchain industry.

It is hoped that such situations will be resolved as the criteria for regulatory targets become clearer in the future.

Biden Administration's Executive Order 14067

Furthermore, under the previous Biden administration, Executive Order 14067 was signed on March 9, 2022, emphasizing consumer and investor protection and fraud prevention, including content indicating a direction toward strengthening regulations on businesses.

While this executive order itself did not directly create new regulations, but its influence as a policy direction was strong, and it is said that under the Biden administration, the SEC actually implemented strict rule enforcement and issued SAB121 (discussed later), among other policies that suppressed industry growth.

The change to the Trump administration this year is expected to be a major shift from suppressing to promoting industry growth.

What FIT21 (Amendment) Aims to Do

Here, I would like to touch on the outline of the important bill Financial Innovation and Technology for the 21st Century Act (FIT21).

This bill is an amendment to the current law, primarily aimed at:

Revising and expanding securities law definitions
Adjusting commodity trading laws (including futures regulations), securities exchange laws, and related legislation
Defining digital assets and blockchain systems, and implementing modifications to exclude them from securities law in certain cases (they may become subject to Commodity Futures Trading Commission regulations instead)
Mandating joint rule-making by the SEC (Securities and Exchange Commission) and CFTC (Commodity Futures Trading Commission)

You can probably already imagine that FIT21 is a highly significant bill for the Crypto industry. This bill proposes that digital assets that meet certain requirements should be excluded from securities law application and treated as commodity trading, even though they might otherwise fall under securities regulations under the traditional securities law framework.

Decentralized Systems

Also, among the definitions in this bill, what is particularly noteworthy is that in addition to being a blockchain system, "decentralization" being sufficiently achieved is listed as an important requirement for regulatory exemption. This is expected to make it possible to clearly determine how much decentralization must be achieved to avoid being subject to legal regulations.

The main indicators of decentralization proposed in the current bill are as follows:

In the past 12 months, NO ONE has:

Had unilateral authority over the system, etc.
Had unilateral authority to exclude specific individuals from blockchain activities (including not only sending and receiving tokens but also participation in DAO communities and participation as node validators)
Owned more than 20% of the target assets
Had more than 20% governance control

In the past 3 months, NO ONE has made significant changes to the system except to address vulnerabilities or based on decisions by the decentralized community, etc.

These concepts align with Tané’s stance on decentralization and permissionless access in the blockchain ecosystem, and they are expected to be clearly defined.

While this bill is just one bill to modify America's specific positive law, the definitions and standards decided here will likely have a significant impact on blockchain-related regulations in other countries.

Since passing the House early last summer, FIT21's deliberation status in the Senate has been unclear, but it has been decided to be an important agenda item for the bipartisan cryptocurrency committee, and we look forward to rapid progress from now on.

💡

As FIT21 is currently still in the bill stage, its content may change through the Senate deliberation process.

Against CBDC Policy

Changing the topic slightly, I would also like to briefly touch on CBDCs, which shows stark differences from the Biden administration.

As introduced earlier, President Trump signed an executive order "Strengthening American Leadership in Digital Financial Technology" that revoked President Biden's Executive Order 14067, which had directed the promotion of CBDC considerations, and implemented a drastic shift by prohibiting CBDC considerations from being conducted. He has also clearly expressed his opposition to CBDCs in various media appearances.

What is CBDC?

First, let's review what a CBDC (Central Bank Digital Currency) is. CBDCs typically have the following characteristics. (For reference, we are also comparing them with stablecoins, which are also dollar-denominated digital assets)

CBDC	Stablecoin
Digitized means of payment	Digitized cryptocurrency
Issued in legal tender such as dollars or yen	Designed to be linked to the price of legal currencies like dollars, yen, or commodities like gold (various type)
Issued as a liability of the central bank	Can be issued by entities other than central banks

The general Pros and Cons of a nation adopting CBDC are said to be as follows:

Pros	Cons
・ Improved security, such as counterfeit prevention ・Reduction of currency and coin issuance costs ・ Reduction of distribution infrastructure costs	・Strengthened central bank monitoring power over national assets ・The central bank's entry into competition with non-centralized currencies like Crypto may hinder industry development ・If another country's CBDC becomes widespread in one's own country, financial sanctions by that other country against one's own citizens become easily possible

Regarding this, President Trump cites excessive strengthening of asset monitoring over citizens and the risk of causing financial instability as his main reasons for opposition.

Currently, 11 countries worldwide have already begun issuing CBDCs, with issuing countries centered on developing nations such as the Bahamas, the eight countries and regions of the Eastern Caribbean Currency Union, Nigeria, and Jamaica.

While there have been no major recent developments regarding CBDC policy other than expressing clear opposition and declaring a ban on consideration, considering the policy of deregulation and liberalization centered on blockchain and the situation where the American dollar is already a world reserve currency with a fairly stable financial environment, it seems to be a politically consistent policy.

Trump Administration's Stablecoin Policy

In contrast, let's briefly discuss stablecoins. Stablecoins are a type of cryptocurrency, but they refer to tokens designed to be pegged (fixed rate) to legal currencies or commodity prices like gold (often at a 1:1 ratio). Stablecoins derive their name from their relatively stable value compared to other cryptocurrencies. (However, there are few cases where the peg breaks and they crash)

As you know, the dollar boasts an absolute position as the world's reserve currency among legal currencies, but in the cryptocurrency/stablecoin world, the circulation volume of stablecoins linked to the dollar is already overwhelming.

CoinMarket Cap, Fiat Stablecoin ranking at 2025/2/19. Most of The top positions are dominated by USD-pegged Coins, which also dominate the MarketCap base.(https://coinmarketcap.com/view/fiat-stablecoin/)

Regarding the handling of stablecoins, the following measures are being considered in the aforementioned FIT21 bill:

Clarification of the definition of stablecoins (distinguishing them from other digital assets)
Implementation of certain regulatory exemptions for payments using permitted stablecoins (PERMITTED PAYMENT STABLECOIN)

Additionally, at the announcement conference of the "bipartisan cryptocurrency committee" (February 4, 2025) mentioned at the beginning, it was also mentioned that emphasis would be placed on creating a stablecoin bill.

From the above situation, a policy is becoming clear: avoiding government market intervention through the introduction of centralized CBDCs, with the government focusing on system design while leaving actual competition to open market competition in the private sector.

Regarding Other Updates

Among other blockchain-related updates, SAB121, which was implemented immediately after the administration took office, is particularly noteworthy. This was a U.S. accounting standard issued by SEC under the Biden administration, requiring that when conducting crypto asset custody business, all custody balances must be evaluated on the balance sheet regardless of the control status of the target custody assets. As a result, costs for financial regulatory compliance (such as capital requirements proportional to custody assets) skyrocketed, creating a barrier especially for banks to enter the crypto asset custody business.

SAB121 has now been revoked and replaced with the newly issued SAB122. This allows companies to no longer need to treat crypto assets specially and to choose substantive accounting standards according to their contract and asset situations under the U.S. accounting standard or IFRS, and so on.

Here too, while the previous Biden administration had a policy of strengthening protection for consumers and investors and regulating businesses, the Trump administration's deregulation policy is well reflected.

Future Outlook

Although the Trump administration has given an impression of hectic movement after taking office, regarding blockchain-related matters, there has only been the abolition of one accounting standard, the establishment of a committee, and the issuance of one executive order, giving the impression that full-scale deregulation movements are still to come.

However, the following milestones have already been indicated for the future, so we would like to continue reporting on them:

Submission of opinions by the SEC's cryptocurrency task force on digital asset framework regulations and legislative proposals 👉️ Within 180 days of task force establishment (corresponding to around this summer)
Senate passage of the stablecoin bill, federal digital asset framework bill, and FIT21 bill 👉️ Target within 100 days of cryptocurrency committee establishment (corresponding to around April this year)

About Tané

Tané believes that "credible neutrality" made possible by decentralization is the source of innovation and the essence of crypto. We will continue to actively contribute to the ecosystem from both investment and business perspectives.

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