STRENGTHENING AMERICAN LEADERSHIP IN DIGITAL FINANCIAL TECHNOLOGY: A Turning Point for Crypto in America
The recent report issued by the President’s Working Group on Digital Asset Markets is a landmark moment for crypto policy in the United States. Clear, well-reasoned, and packed with practical legal and regulatory proposals, the report lays out a bold new path that embraces innovation while defending individual rights. Below are some of the key takeaways that stood out. TL;DR — I’m more bullish than ever on the future of crypto in America.
🔓 Freedom to Build, Freedom to Transact
“Protecting and promoting the ability of individual citizens and private-sector entities alike to access and use for lawful purposes open public blockchain networks without persecution, including the ability to develop and deploy software, to participate in mining and validating, to transact with other persons without unlawful censorship, and to maintain self-custody of digital assets.” (p. 1)
The report opens with a clear affirmation of rights on public blockchains, emphasizing lawful access, use, and development as fundamental liberties.
🛑 Operation Choke Point 2.0: A Cautionary Tale
“The Biden Administration’s approach to crypto was marked by regulatory overreach that countered the American tradition of embracing new technologies. Operation Choke Point 2.0 saw regulators push banks to cut off lawful crypto businesses, effectively debanking the industry.” (p. 5)
The report is unsparing in its criticism of the previous administration’s tactics, characterizing them as an aggressive regulatory overreach that chilled innovation.
🧱 Protecting the Right to Innovate
“American citizens and businesses should be able to own digital assets and use blockchain technologies for lawful purposes without fear of prosecution. Likewise, American entrepreneurs and software developers should have the liberty, and regulatory certainty, to upgrade all sectors of our economy using these technologies.” (p. 6)
🏛️ Reforming the BSA for the Blockchain Era
“Congress should codify principles regarding how control over an asset impacts Bank Secrecy Act (BSA) obligations, particularly for money transmitters. A software provider that does not maintain total independent control over value should not be considered as engaged in money transmission for purposes of the BSA.” (p. 6)
💵 Stablecoins as Dollar Power Tools
“U.S. dollar-backed stablecoins represent the next wave of innovation in payments, and policymakers should encourage their adoption to advance U.S. dollar dominance in the digital age. All agencies to which Congress delegated responsibilities under the GENIUS Act should faithfully and expeditiously execute those responsibilities.” (p. 7)
🌐 Make America the Global Hub for Digital Assets
“To ensure this innovation... takes place in the United States, American markets for digital assets need to become the deepest and most liquid in the world. Just as the United States is the premier destination for capital markets activity... it is imperative that the United States lead by establishing clear rules for digital asset markets.” (p. 43)
🌍 International Leadership Matters
“The United States has a window of opportunity to shape the way these [digital asset] frameworks intersect and interact... The Working Group advises the United States to engage and lead internationally to achieve these objectives.” (p. 59)
🏦 Regulatory Roadblocks Must Go
“Although many in the banking industry supported the growth and development of the crypto ecosystem, regulatory leadership set up roadblocks... requests from these banks were almost universally met with resistance... As a result, the vast majority of banks simply stopped trying.” (p. 63)
⚖️ Fair and Neutral Regulation
“The Banking Agencies should ensure that existing and new best practices or guidance on risk management and bank engagement are technology-neutral and that expectations regarding offering banking services do not discriminate against lawful businesses solely due to their industry.” (p. 75)
🛰️ Stablecoins and Law Enforcement
“Although stablecoins have been used in illicit finance, traditional means of money laundering and terrorist financing remain more prevalent... stablecoin issuers can coordinate with law enforcement to freeze and seize assets to counter illicit use.” (p. 91)
🚫 No to CBDCs, Yes to Privacy
“Discourage, oppose, and prohibit... any agency from undertaking any action to establish, issue, or promote any CBDCs in the United States... Support legislation prohibiting the adoption of any CBDCs... including the Anti-CBDC Surveillance State Act.” (p. 95)
🔍 Most Digital Asset Activity is Legitimate
“Despite increasing over the last decade, the prevalence of money laundering and terrorist financing via digital assets remains well below... fiat currency... certain industry estimates indicate that the vast majority of digital asset activity is legitimate.” (p. 101)
🔧 Tailor AML to DeFi
“Congress should consider codifying language expressing which portions, if any, of the DeFi ecosystem should have AML/CFT obligations and the kinds of obligations actors should have...” (p. 106)
🔄 IRS-BSA Harmonization Needed
“Once digital asset transactions are required to be reported on Form 8300, this discrepancy [between the IRS and BSA] may create substantial industry confusion...” (p. 110)
🛡️ Privacy Is a Right
“The Working Group supports civil liberties protections... enabling privacy is also critical to enabling the increased use of digital assets for payments...” (p. 111)
🧠 Zero Knowledge, Full Compliance
“Zero Knowledge Proofs... can enable users to confirm that their identity has been verified... without revealing underlying personal information... digital identity solutions offer innovative capabilities to protect sensitive information...” (p. 112)
📘 New Tax Rules for New Tech
“Legislation should be enacted that treats digital assets as a new class of assets subject to modified versions of tax rules applicable to securities or commodities...” (p. 129)
💳 Stablecoin Tax Clarity
“Legislation should be enacted that would characterize payment stablecoins for federal income tax purposes... Characterization as debt seems most appropriate...” (p. 131)
💸 Don’t Tax the Dust
“...frequent small rewards... airdrops... may be illiquid and therefore hard to value... the IRS should issue administrative guidance that addresses de minimis receipts of digital assets.” (p. 134)
📑 E-Consent and 1099-DA Simplification
“Treasury and the IRS should propose regulations that provide brokers... a less burdensome method of obtaining consent... to furnish Form 1099-DA electronically.” (p. 137)
🔗 Track Cost Basis Across Exchanges
“Treasury and the IRS should consider proposing regulations requiring basis information to be reported when digital assets are transferred between centralized digital asset exchanges.” (p. 139)
🇺🇸 A Blueprint for the Future
“Overall, I think the report is well written, reasoned and very comprehensive in its coverage of both the challenges digital assets face under current legal frameworks and the proposed solutions to solve these challenges. Well done.”
This report doesn’t just chart a course—it lights the way. Crypto’s future in America is looking brighter than ever.