Strengthening American Leadership in Digital Financial Technology (President's Working Group on Digital Asset Markets report under EO 14178), 166 pp. (Part 4 of 4)
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
(iii) questions
about the precise moment a taxpayer has dominion and control over a new asset given differences in how
digital asset exchanges operate. Moreover, in the fact patterns described above, taxpayers often have a limited
ability to influence when a new asset or the right to obtain a new asset appears.
Priority Guidance
Treasury and the IRS should issue administrative guidance that addresses de minimis receipts of digital
assets.488 The guidance could apply to airdrops, staking, hard forks, and mining rewards for taxpayers who
do not operate a node or carry out digital asset mining.
Legislative Proposals for Other Issues
Timing of Income from Mining and Staking
The receipt of cash or property for services generally is taxable as ordinary income at the time of receipt. For
property received for services, the taxpayer generally includes the fair market value of the property on the date
received in gross income. The basis of property in the hands of the taxpayer is the amount included in gross income.
487 When a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. IRS,
Notice 2014-21, supra note 445. The IRS has stated that if a cash method taxpayer stakes cryptocurrency native to a proof-of-stake blockchain and receives
additional units of cryptocurrency as rewards when validation occurs, the fair market value of the validation rewards is included in the taxpayer’s gross
income in the taxable year in which the taxpayer gains dominion and control over the validation rewards. IRS, Revenue Ruling 2023-14, supra note 448.
488 Stakeholders have urged that taxpayers should not be required to include in income de minimis gains from digital assets, or digital assets used for personal
transactions, by analogy to the rules for personal foreign currency transactions by individuals under Section 988(e). Some bills previously introduced in Congress
have provided for a de minimis inclusion rule. Because digital assets are used for investment or speculation as well as payment, the rationale for the current
exclusion under Section 988(e) is not equally applicable to digital assets. There are better arguments to exclude de minimis gains or losses for digital assets used
primarily for payments (see the stablecoins discussion above). However, any de minimis rule for including gains and losses from digital assets in income would pose
complications that are not relevant in the most common fact patterns where individuals dispose of foreign currency. Unless an individual lives outside the United
States, the likely fact pattern for disposing of foreign currency is when a taxpayer is on vacation for a limited period of time, in which case it is easy to determine
that the transaction is a personal one and it is likely often to be the case that gain from the disposition is under the statutory threshold as a practical matter. By
contrast, digital assets are also used in investment or trading transactions and the same type of digital asset may be used by the same taxpayer for both investment
and payment purposes. If a legislative de minimis rule were modeled on Section 988(e), questions would include: how taxpayers would distinguish personal from
investment/ trading transactions and what records would be considered adequate in that regard; whether an aggregation rule should apply so that taxpayers
cannot split a large transaction into multiple small ones; whether there would be any constraints on taxpayers’ ability to treat gain transactions as non-taxable
personal transactions but loss transactions as investment or business transactions; and how brokers should report transactions if they do not know whether the
transaction is personal or not. This list is not exclusive and would change if a legislative de minimis rule were drafted in a way that differs from Section 988(e).
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Taxation • Taxpayer Reporting
In contrast, income with respect to certain self-created property such as manufactured goods, farmed crops, and
certain self-created intellectual property generally is not realized until the property is sold or otherwise disposed of.
Treasury and the IRS have issued guidance stating that when a taxpayer successfully “mines” virtual currency, the
fair market value of the virtual currency as of the date of receipt is includible in gross income.489 In addition, Treasury
and the IRS have issued guidance holding that if a cash method taxpayer stakes cryptocurrency native to a proof-of-
stake blockchain and receives additional units of cryptocurrency as rewards when validation occurs, the fair market
value of the validation rewards is included in the taxpayer’s gross income in the taxable year in which the taxpayer
gains dominion and control over the validation rewards.490 Stakeholders have asked for clarification, modification, or
reversal of this IRS guidance on the timing of income from mining and staking rewards.
Possible Guidance
In light of these stakeholder requests and given the significant growth and maturation of digital assets
and surrounding infrastructure since the issuance of guidance in 2014, Treasury and the IRS should review
previously issued guidance related to the timing of income from staking and mining and consider whether
to clarify, modify, or reverse that guidance, taking into account any recent intervening developments since
the issuance of such guidance.
Possible Legislation
Several bills have been introduced in Congress to change the timing of income from mining and staking
rewards and several other bills have been proposed. For example, H.R. 8149 (2024) proposed to defer the
inclusion of validation rewards until the year of the sale or other disposition of the rewards. By contrast,
other bills, such as the Responsible Financial Innovation Act, S. 2281 (2023) proposed only to defer the
inclusion of de minimis amounts of income relating to mining or staking until the year of the sale or other
disposition of the digital assets.
If Congress decides to pass legislation regarding the timing of the inclusion of income relating to mining
or staking, Congress should consider whether similar rules should apply to rewards from other digital
asset validation methods, what the character of income upon disposition should be and if ordinary, what
rules should apply to determine the order of dispositions of ordinary versus capital units, and potential
differences between the fair market value of rewards at the time of receipt compared with the fair market
value of rewards at the time of sale or other disposition.
Section 6038D Digital Asset Reporting
Section 6038D requires an individual that holds an interest in one or more specified foreign financial assets with
an aggregate value of at least $50,000 during a taxable year to attach a statement with required information to
the individual’s tax return. A specified foreign financial asset means a financial account maintained by a foreign
financial institution and certain specified foreign assets not held in a financial account maintained by such a
financial institution. Penalties apply to taxpayers who fail to provide the required information, and the time for
IRS assessment of tax and the statute of limitations for assessment are extended beyond the deadlines that
otherwise apply. These rules allow the IRS to cross-check the information that it receives from U.S. taxpayers
against the information that it receives from foreign financial institutions about U.S. customer accounts pursuant
to the Foreign Account Tax Compliance Act (FATCA) of the Hiring Incentives to Restore Employment Act of 2010,
Pub. L. No. 111-147, 124 Stat. 71 (2010). Section 6038D does not explicitly refer to digital asset accounts.
489 IRS, Notice 2014-21, supra note 445; see also Statement on Certain Proof-of-Work Mining Activities, SEC Division of Corporation Finance (Mar. 20, 2025),
https://www.sec.gov/newsroom/speeches-statements/statement-certain-proof-work-mining-activities-032025.
490 IRS, Revenue Ruling 2023-14 (July 31, 2023), https://www.irs.gov/pub/irs-drop/rr-23-14.pdf; see also Statement on Certain Protocol Staking Activities, SEC
Division of Corporation Finance (May 29, 2025), https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities-052925.
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Taxation • Taxpayer Reporting
U.S. taxpayers can transact with offshore digital asset exchanges and wallet providers without leaving the
United States. The global nature of the digital asset market offers opportunities for U.S. taxpayers to conceal
assets and taxable income by using offshore digital asset exchanges and wallet providers. As a result, taxpayers
who wish to hide their assets from the IRS in an offshore account may have an incentive to hold digital assets
rather than traditional financial assets, which could distort financial markets and undermine the effectiveness
of the reporting required by Section 6038D.
As described in the section below titled “Crypto-Asset Reporting Framework Implementation,” pursuant to a
recently adopted international tax reporting standard, many foreign countries are in the process of adopting
rules that will require that crypto-asset service providers report certain transactions by foreign customers to
the tax administration or agency of the service provider’s jurisdiction, which would then exchange appropriate
information with other similar jurisdictions. This could include the United States.
Possible Legislation
Legislation could be enacted that would require taxpayers to report foreign digital asset accounts. A
foreign digital asset account would be a custodial account that holds digital assets that is maintained
by a foreign digital asset exchange or other foreign digital asset service provider. If the United States
implements the Crypto-Asset Reporting Framework (CARF), taxpayers could be required to report
accounts with foreign crypto-asset service providers that are required to report information on U.S.
customers to a non-U.S. tax authority. This would allow the IRS to cross-check the information that it
receives from U.S. taxpayers with the information it would receive from foreign digital asset exchanges
about U.S. customer accounts. Providing the Secretary with authority to coordinate this provision with
other rules could mitigate duplication or minimize burden with respect to other types of reporting rules.
Section 6038D and FBAR Reporting
The information required to be reported under Section 6038D on IRS Form 8938, Statement of Specified
Foreign Financial Assets, is similar to information that many taxpayers are required to report under 31 U.S.C.
§ 5314 and the regulations published thereunder on a form known as a Report of Foreign Bank and Financial
Accounts, or an FBAR, resulting in some duplicative reporting. The Form 8938 is filed with the IRS. The FBAR is
filed with the Treasury Financial Crimes Enforcement Network (FinCEN). If reporting under Section 6038D and
on the FBAR are expanded to require reporting of digital asset holdings, more taxpayers would be subject to
these duplicative reporting obligations.
Possible Legislation
Legislation could be enacted that would streamline the reporting required under Section 6038D and on the
FBAR. Legislation could permit a taxpayer that is subject to both reporting obligations to submit a single form
that would be available both to the IRS and to FinCEN. This could be accomplished by amending 31 U.S.C.
§ 5314 and 26 U.S.C. § 6038D so that the reporting requirements under both titles match, similar to how 31
U.S.C. § 5331 and 26 U.S.C. § 6050I both require reporting on certain large cash payments on FinCEN/IRS
Form 8300. If the form is submitted as an attachment to a federal income tax return, for tax administration
reasons this option should be available only to taxpayers that use a calendar taxable year and file tax returns
electronically. Consideration could be given to conforming the information required to be reported and the
different reporting thresholds and penalties that currently apply with respect to Section 6038D reporting and
FBARs, and, if necessary, to further amending the Code to allow the IRS to provide the reported information
to FinCEN. To the extent that single-filing legislation is enacted, resources should be provided to the IRS
sufficient to carry out the reprogramming of its systems necessary to implement the legislation.
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Taxation • Third-Party Information Reporting
Third-Party Information Reporting
Priority Guidance
Electronic Furnishing of Digital Asset Payee Statements (Form 1099-DA)
Third parties that report information to the IRS are also generally required to provide or furnish a copy of
that information to the relevant taxpayer. These documents are referred to as payee statements. The default
rule for furnishing payee statements to taxpayers is in paper format. Payee statements can be furnished to
taxpayers in electronic format only with taxpayer consent, which must be provided by the taxpayer in the
manner required by the IRS. Current rules provide that the taxpayer must have affirmatively consented to
receive the copy in electronic format.491 The consent requirement is intended to ensure that taxpayers have the
capacity and willingness to receive payee statement electronically.
Unlike traditional financial institutions, digital asset exchanges communicate with their customers exclusively
electronically. Customers have therefore demonstrated that they are able to obtain the information they need from
digital asset exchanges electronically. Requiring digital asset exchanges to send customers a copy of IRS Form
1099-DA, Digital Asset Proceeds From Broker Transactions, in paper form unless a customer affirmatively consents
to electronic delivery imposes unnecessary and burdensome costs on brokers serving the digital asset space.
Priority Guidance
Treasury and the IRS should propose regulations that provide brokers that facilitate sales or exchanges of
digital assets through electronic means with a less burdensome method of obtaining consent from their
customers to furnish Form 1099-DA payee statements in an electronic format.
Crypto-Asset Reporting Framework Implementation
When a U.S. taxpayer sells securities, its U.S. broker provides reporting about the sale on IRS Form 1099-B.
The reporting goes to the IRS with a copy to the selling taxpayer. Historically, taxpayers wishing to avoid IRS
scrutiny did so by holding their cash and securities investments with offshore banks that actively solicited
U.S. customers and had no obligations to report information to the IRS. To address this problem, the IRS has
received information since 2015 from certain foreign jurisdictions on financial accounts that U.S. taxpayers
maintain at foreign financial institutions. In exchange, the IRS provides information to many of those foreign
jurisdictions on financial accounts held by residents of those jurisdictions at U.S. financial institutions, provided
the recipient jurisdiction satisfies certain data confidentiality and security conditions.
As with securities, jurisdictional arbitrage presents a key tax evasion risk for digital assets. The ease of cross-
border transfer and access to offshore exchanges enables U.S. taxpayers seeking to evade their tax obligations
an offramp to do so. As the ecosystem matures in the United States, leaving these pathways untouched would
create a structural disadvantage for brokers and exchanges domiciled in the United States.
Other countries have similar concerns about the potential for their taxpayers to carry out digital asset
transactions in a way that avoids domestic tax scrutiny by moving their assets offshore. The Crypto-Asset
Reporting Framework (CARF) is an international tax transparency standard that seeks to improve tax
491 Section 401 of the Job Creation and Worker Assistance Act of 2002, Pub. L. No. 107-147, 116 Stat. 21 (2002) provides that any person required to furnish
a payee statement under certain information reporting provisions of the Code (including Section 6045) may electronically furnish such statement
to any recipient who has consented to the electronic provision of the statement in a manner similar to the one permitted under regulations issued
under Section 6051 of the Code or in such other manner as provided by the Secretary. The rules that currently apply to furnishing payee statements
electronically under Section 6045 are based on the Section 6051 regulations, which apply to furnishing employee statements on Forms W-2. See IRS,
Pub. No. 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns (July 22, 2024),
https://www.irs.gov/pub/irs-pdf/p1179.pdf.
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Taxation • Third-Party Information Reporting
compliance for transactions involving digital assets by requiring that digital asset service providers report
certain transactions to the tax administration or agency of the provider’s jurisdiction, which would then
exchange appropriate information with other jurisdictions participating in CARF. As of May 2025, more than 65
jurisdictions have committed to implementing CARF. U.S. implementation of CARF pursuant to Section 6045
would allow the IRS to obtain information on digital asset transactions of U.S. taxpayers in foreign jurisdictions
by collecting and exchanging information on U.S. transactions of residents of those jurisdictions.
U.S. regulations implementing CARF would discourage U.S. taxpayers from moving their digital assets to
offshore digital asset exchanges. Implementing CARF would promote the growth and use of digital assets in
the United States and alleviate concerns that the lack of a reporting program could disadvantage the United
States or U.S. digital asset exchanges.
However, U.S. digital asset exchanges are currently implementing regulations under Section 6045 that will
require those exchanges to start reporting information on 2025 sales and exchanges of digital assets by U.S.
customers in 2026, with additional stages of reporting and backup withholding coming into effect after 2025.
In order to minimize burdens on U.S. digital asset exchanges, any new reporting obligations on U.S. digital asset
exchanges should take into account both the timing of the rollout of reporting and withholding obligations
under the existing regulations and also coordination with the operative rules of the existing regulations, for
example the identification of entities subject to reporting, the types of assets and transactions required to be
reported, and the procedures for customer due diligence that must be carried out.
Priority Guidance
Treasury and the IRS should consider proposing regulations to implement CARF that take stakeholder concerns
into account and minimize burdens on brokers to the extent consistent with CARF rules. The proposed
regulations should not impose any new reporting requirements on DeFi transactions and should be used as a
forum to gather further feedback, including a reasonable timetable for implementation.
Other Issues
Basis Reporting on Transferred Digital Assets
Digital asset exchanges that are brokers for federal tax information reporting purposes are required to report
information to the IRS and to taxpayers on the gross proceeds from sales of digital assets, for transactions on or
after January 1, 2025, and the basis of certain digital assets sold, for transactions on or after January 1, 2026.492
The combination of gross proceeds and basis information is necessary for taxpayers and the IRS to determine
the taxpayers’ gain or loss from the digital asset sale. Without basis information, broker reporting to customers
would provide an incomplete picture, because it would identify transactions carried out by customers and
gross proceeds received but not gain or loss. Reporting of that kind is likely to be confusing to customers, who
would not receive the full information they need to properly report transactions on their income tax returns.
Because the IRS would not receive basis information, this could result in IRS audits of tax-compliant taxpayers
who correctly took basis into account on their tax returns. Accurate basis reporting is thus essential to
preventing and identifying tax evasion and tax avoidance and prioritizing enforcement resources.
Under the final regulations, digital asset exchanges are required to report basis only if they have reliable basis
information—namely where the taxpayer acquired, held and sold the digital asset at that exchange. However,
taxpayers frequently transfer digital assets in and out of accounts at exchanges, so it is common for a taxpayer
to acquire an asset with one exchange but then sell or exchange it through a second exchange. In recognition
492 At the request of industry, brokers are provided with an additional year to develop basis tracking systems, which are more difficult to build than the gross
proceeds reporting systems.
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Taxation • Third-Party Information Reporting
of this common practice, the 2021 Infrastructure Investment and Jobs Act (IIJA) amended Section 6045A
to require reporting of basis information when digital assets are transferred to digital asset exchanges that
are brokers. These requirements are already in place when securities are transferred to or from securities
brokers. When a taxpayer buys a security at one broker and later transfers the security to a second broker, the
first broker must provide basis and other information to the second broker, but not to the IRS, on a transfer
statement. As a result, if the taxpayer later sells the security through the second broker, the second broker can
report to the taxpayer and the IRS both the gross proceeds of the sale and the basis of the security sold.
Transfers between centralized digital asset exchanges are similar in kind to the transfers of securities described
above. The IIJA amendment to Section 6045A provides for transfer statements when digital assets are
transferred to a digital asset exchange that is a broker. Implementing this legislation would improve the quality
of the tax information taxpayers will receive from digital asset exchanges when they sell digital assets, by
providing reliable basis information to those exchanges with respect to digital assets transferred to one digital
asset exchange from another digital asset exchange.
Possible Regulations
Treasury and the IRS should consider proposing regulations requiring basis information to be reported
when digital assets are transferred between centralized digital asset exchanges.
Digital Assets Received in a Trade or Business
If a trade or business receives more than $10,000 of cash in a transaction for, among other things, goods or
services, the business generally must report that information to the IRS and to FinCEN. These coordinating
rules are intended to detect and prevent tax evasion and financial crimes. Existing rules permit taxpayers to use
the same form to report information to either the IRS or FinCEN, instead of to both agencies, which reduces the
burden on filers.
The IIJA expanded the scope of reporting to the IRS by requiring reporting if a taxpayer uses digital assets to
make payment. The implicit premise of this expansion is that using digital assets to pay for real-world goods
and services normally purchased with money has the same effect as converting the digital assets to cash
(which is required to be reported to the IRS) and using the cash to pay for the goods and services (which is also
required to be reported to the IRS). The IIJA did not expand FinCEN’s corresponding rule requiring the filing of
reports that are highly useful to law enforcement.493 This discrepancy causes disparate treatment of the use of
digital assets to pay for goods and services.
Stakeholders have raised privacy and other concerns about the IIJA amendment. One concern is that reporting
by, for example, certain service providers may reveal personal information to the IRS that it otherwise would
not have. Another concern expressed by stakeholders is that the amendment could apply not only to the use
of digital assets for traditional goods and services, but also to crypto-native transactions such as the swapping
of one digital asset for another. A third concern that stakeholders have raised is that the amendment could
provide a disincentive for taxpayers to use digital assets in the ordinary course of commerce, considering the
current statutory dollar threshold.
Possible Regulations
Treasury and the IRS should consider proposing regulations implementing reporting of digital assets paid
to a trade or business in a manner that takes the stakeholder concerns described above into account.
493 Additional information on FinCEN’s reporting rules under the BSA are included in Chapter VI.
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Taxation • Third-Party Information Reporting
Possible Legislation
Consideration should be given to legislation to conform the information required to be reported to FinCEN,
for BSA purposes, and the IRS, for federal income tax purposes. The legislation could also reexamine the
reporting dollar thresholds and the breadth of uses of digital assets to which this provision would apply.
Additional proposals related to the Form 8300 are included in Chapter VI.
Legislative Proposal for Other Issue
Implementation of CARF
A well-known technique used to avoid tax reporting by a financial institution or broker is to invest through a
shell company. CARF provides that digital asset exchanges should identify and report on the controlling person
of certain passive entities. The IRS does not have authority to require digital asset exchanges to report on
controlling persons of many shell companies and therefore cannot provide that information to other countries.
A number of major trading partners of the United States are unwilling to provide information on U.S. persons
who control shell companies carrying out digital asset transactions on foreign exchanges if those trading
partners do not receive similar information from the IRS. Enactment of legislation that would permit the IRS
to require U.S. digital asset exchanges to report information on foreign controlling persons of shell companies
would ensure that the IRS could obtain similar information on U.S. taxpayers that control shell companies.
Possible Legislation
Legislation could require digital asset brokers to report information on foreign controlling persons of
certain passive entities.
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Table of Recommendations • Third-Party Information Reporting
Table of Recommendations
Digital Asset Market Structure
Policy Responsibility
Recommendation
Congress Regulator
Enabling the Trading of Digital Assets at the Federal Level
Immediate Actions
The SEC should consider using its rulemaking and exemptive authority under the
Securities Act to advance the following initiatives: SEC
• Establish a fit-for-purpose exemption from registration under Section 5 of the Securities Act for securities
distributions involving digital assets.
• Establish a time-limited safe harbor or exemption from certain securities law requirements for transactions
involving digital assets that may be subject to an investment contract because they are not yet fully functional or
associated with a sufficiently decentralized network to allow for progressive functionality or decentralization.
• Establish a safe harbor for certain airdrops from characterization as “sales” under Section 2(a)(3) of the
Securities Act or an exemption from the corresponding registration requirements under Section 5 of the
Securities Act. Consider also an exemption for distributions of digital assets by decentralized physical
infrastructure (DePIN) providers in securities transactions for purposes of rewarding participation in DePIN
networks, as well as distributions of certain NFT offerings.
The SEC should consider using its rulemaking and exemptive authority under the
SEC
Exchange Act to advance the following initiatives:
• Enable non-security digital assets that are tied to an investment contract to be traded on non-SEC registered
trading platforms immediately following the primary distribution of the digital asset.
• Provide relief for certain DeFi service providers from the broker-dealer (Section 15), exchange (Sections 5 and
6), and clearing agency (Section 17A) registration provisions of the Exchange Act.
• Amend Regulation ATS to (or create a framework similar to Regulation ATS that would) better accommodate
trading of non-security digital assets alongside securities under a regulatory framework that is fit-for-purpose for
digital asset trading.
• Create a conditional “innovation exemption” under the Exchange Act to allow SEC registrants to engage in
innovative new business models.
• Address the definition of “facility” under Section 3(a)(2) of the Exchange Act to consider business models
used in digital asset trading.
• Consider amendments to Regulation NMS (or to applicable national market system plans) to better
accommodate tokenization of NMS securities, or trading of non-security digital assets alongside NMS
securities, including requirements applicable to transaction reporting and mechanisms for collecting bids,
offers, quotation sizes, and other national market system information. This may include consideration of how
amendments could facilitate the use of oracles, aggregators, and other DeFi constructs in the trading of NMS
securities and/or non-security digital assets.
• Modernize transfer agent rules to clearly permit the use of blockchain technology by transfer agents.
• Provide clarity regarding whether and when self-hosted wallet providers would be acting as broker-dealers
subject to SEC registration.
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Table of Recommendations •
Digital Asset Market Structure
Policy Responsibility
Recommendation
Congress Regulator
The SEC should consider using its rulemaking and exemptive authority under the
Investment Advisers Act, the Investment Company Act, and other applicable laws to SEC
advance the following initiatives:
• Provide clarity on the custody of digital assets that are securities for Registered Investment Companies and
Registered Investment Advisers by updating the rules under Section 17(f) of the Investment Company Act and
Rule 206(4)-2 of the Investment Advisers Act.
• Evaluate whether certain state-chartered trusts should be deemed “qualified custodians,” as defined within
Advisers Act Rule 206(4)-2(a)(6) or a “bank” under the Investment Company Act.
The CFTC should consider using its rulemaking, interpretative, and exemptive authority
CFTC
under the Commodity Exchange Act (CEA) to advance the following initiatives:
• Provide guidance to designated contract markets (DCMs) regarding the listing of leveraged, margined, or
financed spot retail commodity transactions on digital assets pursuant to CEA section 2(c)(2)(D).
• Provide guidance as to how digital assets may be considered commodities under Section 1a(9) of the CEA. For
example, the agency can consider expanding upon prior guidance on “actual delivery” of virtual assets.
• To the extent that digital asset investment vehicles or their managers may be considered “Commodity Pools”
or prompt registration of “Commodity Pool Operators,” the CFTC will consider updating rules and guidance as
appropriate.
• Collaborate with FinCEN to provide guidance regarding customer identification programs (CIPs) utilizing
new technologies for eligible intermediaries and other market participants who carry customer accounts
holding digital assets on behalf of customers. This collaboration can explore intermediaries’ and other market
participants’ reliance on other financial institutions’ identification and verification functions.
• Enable firms to provide bundled trading and custody services.
• Provide clarity on the applicability of various CFTC registration requirements to DeFi activities, smart contract
protocols, or decentralized autonomous organizations (DAOs) consistent with technology-neutral principles.
• Provide guidance to FCMs in calculating and administering segregation obligations when digital assets are
held on behalf of customers, including separate account treatment under Regulation 1.44.
• Provide clarity on haircuts on digital assets held by registered intermediaries (including FCMs, swap dealers,
and DCOs) for purposes of calculating and reporting margin, financial resources/capital, segregation, and
settlement obligations, including working with the SEC around the non-marketable securities haircut
framework and its applicability to non-security digital assets.
• Review the application of eligible depository rules to accounts holding digital assets as collateral under CFTC
Regulation 1.49.
• Provide guidance for DCO acceptance of digital asset collateral (including payment stablecoins) including
DCO financial resource requirements, valuation of assets and haircuts for margin purposes, settlement
finality, treatment of digital asset custodians and self-custody, systems safeguards requirements, end-of-
day reporting for assets that trade 24/7, and legal risk considerations in such areas as netting and interests in
collateral under CFTC Regulations 39.11, 39.13, 39.14, 39.15, 39.18, 39.19, and 39.27.
• Provide guidance on the adoption of tokenized non-cash collateral as regulatory margin to implement the
CFTC’s GMAC DAMS recommendation.
• Provide guidance on the classification of swaps on digital assets to address application of margin, reporting,
and other requirements under CFTC Regulations 1.3, 23.154, 43.2, and 45.1.
• Consider allowing the use of blockchain technology to satisfy recordkeeping obligations under CFTC
Regulation 1.31.
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Table of Recommendations •
Digital Asset Market Structure
Policy Responsibility
Recommendation
Congress Regulator
The SEC and the CFTC should coordinate to ensure efficient rulemaking processes. The
SEC,
SEC and CFTC should coordinate on seeking comments from the public on suggestions
CFTC
for rulemaking.
If the SEC and CFTC establish a regulatory sandbox or safe harbor, it should have clear
criteria to determine which types of digital assets and market participants are eligible SEC,
for the sandbox or safe harbor. Moreover, there should be a clear pathway for entities to CFTC
graduate from the sandbox or safe harbor.
In coordination with the SEC, the CFTC should consider using its authority within CEA
section 1a(18) to establish a category of eligible contract participants (ECPs) with the
CFTC,
ability to engage in certain types of derivatives, including perpetual contracts, through
SEC
additional regulated intermediaries (e.g., persons that are counterparties to a specified
transaction conducted on or pursuant to the rules of an alternative trading system).
Longer-Term Considerations
The SEC and CFTC should explore offering flexibility to allow registrants to offer SEC,
multiple services within a single user interface. CFTC
• The Working Group encourages regulatory exploration of more vertically integrated business models in the
digital asset space. These business models should include appropriate structural safeguards, governance
mechanisms, and disclosures to mitigate conflicts of interest.
• While addressing conflicts and ensuring existing registrants are not disadvantaged, regulators may consider
adopting regulatory regimes that allow registrants to integrate multiple financial services in one business
model, which could further reduce frictions and enhance user experience.
◆ Combining exchange services with custody of trading assets allows for real-time settlement. The
custodian holds the assets, and the exchange matches orders to buy and sell those assets. Additionally,
the digital assets custodied by an exchange should be cryptographically verifiable.
◆ Combining exchange and broker services allows for economies of scale and reduces operational
complexity by permitting straight-through processing of customer orders with the same technology
stack.
◆ Exchanges and intermediaries must segregate customer property away from proprietary funds, subject to
reasonable exceptions.
The CFTC should consider how existing rules could be amended to enable the use of
CFTC
blockchain-based derivatives.
• Such considerations should include evaluating the benefits of blockchain-based derivative transactions or
systems with respect to the regulatory requirements of central clearing, and frameworks around reporting
obligations, margin levels, and contract listings in a non-intermediated environment.
Absent congressional action, the SEC and CFTC should use their existing authorities to
SEC,
provide fulsome regulatory clarity that best keeps blockchain-based innovation within
CFTC
the United States.
• The Working Group strongly recommends that Congress expeditiously advance market structure legislation
to the President’s desk.
• However, as market structure deliberations continue in Congress, the Working Group similarly recognizes that
the market regulators can work to provide appropriate accommodation for digital asset trading and innovation
in their rules to ensure responsible innovation occurs in the United States.
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Table of Recommendations •
Digital Asset Market Structure
Policy Responsibility
Recommendation
Congress Regulator
Creating a Lasting Framework for Digital Asset Market Structure
Jurisdiction of Market Regulators
The CFTC should have clear authority to regulate spot markets in non-security digital
assets. SEC and CFTC registrants should be permitted to engage in multiple business SEC,
Congress
lines under the most efficient licensing structure possible, ensuring a clear and simple CFTC
regulatory framework for digital asset market activities.
• Regulation should be crafted to avoid regulatory arbitrage between the SEC and CFTC digital asset regulatory
regimes, understanding that the regulation of digital asset securities is necessarily different than that applied
to non-security digital assets.
◆ Interagency coordination could guide these efforts.
• Registrant platforms should have the flexibility to offer a broad range of digital asset and other regulated
products within a single user interface, subject to clearly defined regulatory oversight of the registrant.
• SEC registrants should be able to offer the trading of digital asset securities and be able to engage in non-
security digital asset transactions pursuant to the licensing structure defined by Congress.
• CFTC registrants should be able to offer the trading of digital commodity derivatives, retail digital commodity
transactions, and other CFTC-jurisdictional products alongside non-security digital assets, as specified by
Congress.
• To the extent Congress permits activity in non-security digital assets outside CFTC registrants, Congress
should direct the market regulator leading the rulemaking process to set rules for market conduct and
activities for non-security digital assets in consultation with the SEC or CFTC, as appropriate.
• Rules for digital assets should include portfolio margining standards, as suggested by CLARITY.
• The SEC and CFTC should adopt rules ensuring customer asset segregation for digital assets.
• Trading venues for non-security digital assets should be required to report market data, subject to reporting
obligations established by the CFTC. If a trading venue is engaged solely in the provisioning of non-security
digital assets, there should only be reporting obligations to the CFTC.
◆ Prior to the enactment of any reporting obligations, the CFTC should consult with the SEC on the data to
be reported and the format in which it is reported to minimize industry burden.
Congress should provide that federal law preempts state law with respect to securities
and commodities laws applicable to SEC- and CFTC-registered intermediaries, including Congress
in the areas of state virtual currency business, “blue sky,” and commodity broker laws.
Guidelines for Market Intermediaries
Digital asset trading platforms, brokers, dealers, custodians and other registrants should
be subject to a tailored registration regime that is fit-for-purpose under the SEC or
CFTC, as appropriate and based upon the intermediary’s activities. SEC,
Congress
• Consistent with the existing financial markets regulatory framework, the regime CFTC
should include principles-based requirements that are no more onerous than those
safeguards applied to existing registrants.
Intermediaries should be allowed to lend against, net, and hedge securities against non-
securities, as risk characteristics permit.
• Coordinated regulatory treatment can ensure appropriate market oversight, while SEC,
Congress
recognizing economic equivalence across different asset types. CFTC
• The SEC and CFTC should have appropriate flexibility in setting applicable rules for
their registrants.
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Table of Recommendations •
Digital Asset Market Structure
Policy Responsibility
Recommendation
Congress Regulator
Issuers of digital asset securities, and of securities involving digital assets, should
be subject to disclosure requirements that are appropriately tailored to address the
novel characteristics of digital assets and blockchain technology. Digital asset trading
Congress CFTC
platforms, brokers, dealers, and other CFTC-registered intermediaries that make
available non-security digital assets should be required to disclose any such information
that the CFTC determines to be appropriate for non-security digital assets.
• Further, these parties should not be subject to ongoing disclosure requirements other than those required by
Congress in future legislation or by the relevant market regulator. Furthermore, any such ongoing disclosures
should be fit-for-purpose and guided by publicly available information, such as open-source code, whenever
possible.
• Digital asset trading platforms, and other intermediaries as appropriate, should publish the criteria that govern
the listing of digital assets that are traded.
◆ In addition, digital asset trading platforms, and other intermediaries as appropriate, should consider
prominently disclosing features that may be unique to digital assets, such as token economics (i.e.,
allocation percentages and rationales) and source code, if applicable.
For institutional over-the-counter block trades of digital assets that occur offchain
through regulated intermediaries, there should be similar reporting and disclosure Congress
requirements to those that apply to similar activities in traditional markets.
• These reporting and disclosure requirements need not be instantaneous, but it is critical to ensure there are
not loopholes or “blind spots” associated with digital asset trading activity that occurs offchain.
Digital asset trading platforms, brokers, dealers, and other SEC and CFTC registrants
should disclose the capacity in which they are acting on behalf of the customer, client, or Congress
counterparty (i.e., dealer, broker, counterparty, routing to an order book, etc.).
• Digital asset firms may serve in a variety of capacities when offering digital asset trading. Congress should
consider disclosure requirements or standards depending on the nature of the relationship between the firm
and the market participant (e.g., retail, institutional, customer, client, counterparty, etc.).
Trading platforms should be permitted to custody customer digital assets with appropriate
Congress
controls.
• Safeguards may include requirements for asset segregation, disclosures, principles-based cybersecurity
standards, bankruptcy remoteness, separation of legal entities, separation from margin and rehypothecation
entity, capital requirements, liquidity and redemption requirements, and regulatory supervision.
• Trading platforms should also enable users engaging in self-custody to transact, and should be prohibited
from discriminating against third-party custodians who offer products that compete with those provided by
the trading platform or an affiliate.
Market intermediaries should be subject to principles-based rules regarding the margin
and leverage they can extend to retail participants, based on the functions of margin
and leverage in their respective activities. Congress should clearly define the rules and Congress
responsibilities between the SEC and CFTC regarding margin and leverage, but allow
the regulators appropriate flexibility in setting such rules.
• Financing rates offered to retail customers should be publicly disclosed by the party offering leverage.
Congress should consider extending Exchange Act Section 31 fee structures to all SEC-
Congress
registered products offered on SEC-regulated platforms.
• Intermediaries offering digital asset services should pay fees equivalent to those that traditional finance
intermediaries pay in the equity markets.
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Table of Recommendations •
Digital Asset Market Structure
Policy Responsibility
Recommendation
Congress Regulator
SEC and CFTC registrants should be required to adopt best practices for cybersecurity
Congress
standards.
• These standards may be adopted as part of a principles-based regulatory framework or proposed as industry best
practices.
Regulatory Treatment of DeFi
As contemplated in provisions of CLARITY, Congress should consider the following
Congress
factors when determining the regulatory treatment of DeFi:
• The extent to which a given software application exercises “control” over user assets.
◆ Without the ability to exercise control over user assets or funds, a software application may not transmit
money or exchange currency, and therefore might not be subject to the BSA as an MSB. Importantly,
without control, software applications generally lack the ability to misappropriate user assets.
• The extent to which a given software application, once built or deployed, is technologically capable of being
modified.
◆ Software applications in DeFi use smart contracts. In many cases, smart contracts cannot be modified
or withdrawn once deployed. Implementing changes in those cases requires the creation of entirely new
smart contracts.
◆ The operations of a software application, including the smart contracts or the economics of the service
more broadly, may be administered by a single actor or a group of actors working together.
◆ As such, Congress should consider the degree to which a single actor, or group of actors working together,
has the unilateral ability to upgrade a software application’s smart contracts or change its economics in a
manner not previously disclosed in the software or protocol rules.
• The extent to which a software application is controlled by, or operates with, a centralized structure or
management.
◆ If a product or service is operated, managed, or otherwise controlled by a business and facilitates access
to a DeFi system engaged in otherwise regulated activity, that product or service should be subject to
regulation accounting for underlying regulated activity and pursuant to the principles of fair competition,
customer protection, conflicts of interest, integrity of code, cybersecurity standards, and other principles
as appropriate.
• The extent to which a given software application is technologically or logistically capable of complying with
current regulatory obligations.
◆ Many DeFi protocols and non-controlling blockchains do not have the functional ability to register as
MSBs or otherwise comply with MSB obligations under the BSA, while businesses (as described above)
could register. Nevertheless, Congress could consider how obligations can be fit-for-purpose to the
technology and embrace the unique characteristics of DeFi, rather than placing the current financial
regulatory regime on top of DeFi services.
◆ Care should be taken to ensure that actors are not permitted to structure products to subvert legal
responsibilities.
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Table of Recommendations •
Digital Asset Market Structure
Policy Responsibility
Recommendation
Congress Regulator
Accounting Recommendations
The Working Group observed that many questions on the accounting for digital asset
transactions relate to the following key concepts that FASB should consider for further FASB
consultation through public engagement:
• Recognition and derecognition. Whether an entity should recognize or derecognize digital asset tokens when
entering into certain transactions. For example, should a lender of digital assets derecognize such assets, and
should there be symmetry in accounting between a lender and borrower? Similar questions may arise related
to wrapping tokens or transacting with decentralized lending or exchange protocols.
• Issuer accounting. How an entity should account for digital asset tokens it creates and issues. The accounting
by the token issuer will depend on the issuer’s facts and circumstances, and the enforceable rights and
obligations of the parties involved. To the extent a token conveys rights or obligations that align with
traditional assets or instruments (e.g., ownership of tangible commodities, debt, or equity), then established
accounting guidance already exists. Additionally, FASB should consider whether to treat payment stablecoins
as cash equivalents under GAAP. Further clarification is required in cases where tokens provide utility or
access without clearly enforceable rights – particularly when tied to the future development of a platform.
There is no explicit guidance to address the accounting for those types of token issuances.
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Table of Recommendations •
Banking and Digital Assets
Policy Responsibility
Recommendation
Congress Regulator
Current Regulatory Framework
Relaunch agency crypto innovation efforts—as appropriate—to address outstanding FRB, FDIC,
bank activities. OCC
• These efforts should prioritize providing clarity on the activities that banks are most interested in conducting
with a clear process for considering other or new activities. The objectives would be to:
◆ Clarify or expand the recognized, permissible digital asset activities in which banks may engage,
consistent with applicable law;
◆ To the extent possible, and consistent with applicable law, ensure parity in permissibility between bank
charter types; and
◆ Clarify supervisory expectations on safe and sound conduct that protects consumers and is compliant
with applicable laws and regulations in bank engagement with digital assets, private and permissionless
blockchains, tokenized deposits, and where to conduct principal bank activities (e.g., in the insured
depository institution or the holding company).
• The initial activities and topics to consider include:
◆ Custody of Digital Assets. While the Banking Agencies have clarified permissibility and certain risk
management considerations, it could be beneficial to provide additional guidance on technical best practices.
◆ Third Parties. While the Banking Agencies have clarified the permissibility of using third parties as sub-
custodians, it may be beneficial to ensure any additional guidance on permissibility or risk management
for other digital asset activities reiterates the ability to use third parties as infrastructure providers or for
other digital asset services.
◆ Holding Stablecoin Reserves as Deposits. While the OCC has clarified permissibility, it could be beneficial
to offer additional guidance now that GENIUS has been enacted.
◆ Principal Activities. Provide clarity on the permissibility for depository institutions to hold digital assets on
their balance sheet and any associated safety and soundness concerns.
◆ Pilots. Clarity is needed on the ability for depository institutions to participate in pilots and experiments
related to digital assets.
◆ Tokenization. Provide clear risk-based guidelines that consider underlying risk and asset features to
determine the permissibility of bank tokenization activities, including tokenization of deposits.
◆ Permissionless Blockchains. Provide clarity regarding the use of permissionless blockchains that ensures
a technology-neutral approach focusing on underlying risks of the activity or technology versus using
technology alone as a proxy for risk.
Encourage innovation in banking technologies and products by state-chartered banks. FRB
• The FRB should rescind the 2023 Section 9(13) Policy Guidance and 12 C.F.R. § 208.112 (which effectively
codifies the Policy Guidance into Regulation H), to ensure that state member banks are permitted to explore
innovative banking technologies and products.
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Table of Recommendations •
Banking and Digital Assets
Policy Responsibility
Recommendation
Congress Regulator
FRB, FDIC,
Develop guidance and best practices to support banks and supervisors that is
OCC,
technically sound and principles-based.
Commerce
• Risk management principles and best practices described in existing agency issuances generally
provide flexible guidance for banking organizations’ considerations that can apply to the safe and sound
implementation of innovative technologies and products, including those related to digital assets and DLT.
Nonetheless, it is important that agency examination teams and banks are properly equipped to adopt current
risk management principles to digital asset technologies.
• This could involve engagement with NIST and others to identify applicable standards or best practices that
could be used in guidance for some digital asset activities such as providing digital asset custody services,
ensuring compliance with applicable AML/CFT obligations (see Chapter VI, which discusses the AML-specific
regulatory duties for digital assets for more details), or managing cyber risks particular to digital assets.
• This could also include best practices or standards applicable to banks’ use of third parties in the provision of
digital asset services.
• Finally, the Banking Agencies and state regulators should ensure that their examination teams are adequately
educated on issues related to digital assets and the consistent application of best practices and standards across
Clarify the role of supervisors and banks in offering banking services to potential FRB, FDIC,
customers. OCC
• 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. For example, OCC Bulletin 2014-
58: Banking Money Services Businesses: Statement on Risk Management, which makes clear that the OCC
expects OCC-regulated banks to assess the risks posed by an MSB customer on a case-by-case basis rather
than to consider all MSBs high risk, could be extended, and the FRB and FDIC could issue similar guidance.
• Notably, much work has already been done in in this area as the Banking Agencies withdrew previous
guidance on bank engagement with digital assets that did not fully adhere to that principle.
• Additionally, the removal of reputation risk as a basis for supervisory criticism by the Banking Agencies is also
underway and should be finalized as soon as possible.
Access to Providing Banking Services
Provide clarity and transparency regarding the process for eligible institutions to obtain FRB, FDIC,
a bank charter or a Reserve Bank master account. OCC
• The relevant Banking Agencies should clarify and define in regulation the expected timelines for decision-
making on completed applications for charter licensing (including federal deposit insurance where applicable)
and requesting a Reserve Bank master account.
• If regulatory timelines are not met for a given application, the application should be deemed approved absent
extraordinary circumstances.
• The Banking Agencies should also confirm that otherwise eligible entities are not prohibited from obtaining
bank charters, obtaining federal deposit insurance, or receiving Reserve Bank master accounts or services
solely because they engage in digital asset-related activities.
• Finally, the Banking Agencies should provide additional transparency, as appropriate, on the number of, and
average time to review, complete applications, including new charter applications, federal deposit insurance
applications, and Reserve Bank master account applications, on both an aggregated and annual basis.
STREN GTH EN I N G AMERI CAN L EA DERS HIP IN DIGITAL FINANCIAL TECHNOLO GY • 149 •
Table of Recommendations •
Banking and Digital Assets
Policy Responsibility
Recommendation
Congress Regulator
Capital and Other Applicable Regulatory Treatment
The Banking Agencies should clarify the circumstances, using risk-based guidelines, FRB,
under which tokenized assets and tokenized asset collateral would be subject to the FDIC,
same capital and liquidity treatment as the underlying asset or collateral. OCC
The United States should adopt capital requirements for bank digital asset activities that FRB,
accurately reflect the risk of the asset or activity. Additionally, the United States should
FDIC,
advocate that the BCBS revisit the cryptoasset standards to ensure similar treatment to
U.S. capital requirements. OCC
FRB, FDIC,
Simplification of the cryptoasset grouping.
OCC
• BCBS’s four groups of cryptoassets should be simplified. Applying a separate classification to traditional
assets due to the use a specific technology does not adhere to the principle of technology-neutrality.
Furthermore, the treatment of tokenized traditional assets as cryptoassets is misleading and may create
unintended negative consequences. Additionally, the BCBS distinction between Group 2a and Group 2b
cryptoassets does not create a clear enough distinction between cryptoassets widely used for payment and
investment purposes and other cryptoassets, such as memecoins.
• The U.S. prudential cryptoasset framework should: (i) clarify when tokenized traditional assets are equivalent
to traditional assets and are subject to the same capital and liquidity requirements as traditional assets; (ii)
work to align the BCBS definition of stablecoins eligible for Group 1b treatment with requirements set forth in
GENIUS; and (iii) simplify the classification of Group 2 cryptoassets and address the treatment of cryptoassets
outside of Group 2.
FRB, FDIC,
Use of permissionless blockchain for all groups of cryptoassets.
OCC
• Under the BCBS standards, cryptoassets relying on permissionless blockchains pose risks that may prevent
them from being included in Group 1. However, experimentation and testing with permissionless blockchains
by regulated financial institutions suggests that technical solutions to mitigate the risks identified by the
BCBS are being actively developed and implemented. The BCBS also raises concerns with the probabilistic
settlement of permissionless blockchains. However, over the last several years, market participants have been
developing industry standards for determining when a settlement has completed on probabilistic blockchains.
• The United States should consider incorporating those standards to inform the prudential treatment of those
characteristics of distributed ledger technology.
Review the calibration of capital requirements for credit risk, market risk, operational
FRB, FDIC,
risk, and liquidity risk to incorporate empirical evidence of recent changes in cryptoasset
OCC
performance and risk.
• Changes in the grouping of cryptoassets may not fully modernize the BCBS cryptoasset prudential standards.
The United States should also revisit the calibration of the prudential standards to consider incorporating recent
innovations and changes in the cryptoasset market since the BCBS standards were first published in 2022.
• The Banking Agencies should undertake a comprehensive data analysis on the performance and risk of
cryptoassets informed by issuing a request for information from the public, inclusive of representatives from
cryptoasset data vendors, distributed ledger infrastructure providers, banking organizations of all sizes,
and industry associations. The analysis would assist the Banking Agencies in determining the appropriate
calibration for cryptoasset capital and liquidity standards.
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Table of Recommendations •
Insurance
Policy Responsibility
Recommendation
Congress Regulator
Engage with the appropriate regulatory agencies to establish or amend legal definitions
of securities, property, or currency so that insurance policies explicitly cover digital
Treasury
assets. Treasury could also work with the insurance sector to create standardized terms,
conditions, and policy language for digital assets.
Engage with the NAIC and state insurance regulators on potential revisions to state
regulations relating to digital assets, including allowing insurers to invest in digital Treasury
assets, as appropriate.
Prioritize engagement between the public and private sector to help develop a robust
Treasury
insurance market for digital assets.
Stablecoins and Payments
Policy Responsibility
Recommendation
Congress Regulator
Innovation in Payments
Faithfully and expeditiously implement GENIUS. Primary Responsibility:
Treasury, FRB, FDIC,
OCC, NCUA
Secondary Responsibility:
SEC, CFTC
Central Bank Digital Currencies (CBDCs)
Primary Responsibility:
Discourage, oppose, and prohibit the ability of any agency from
FRB, Treasury
undertaking any action to establish, issue, or promote any CBDCs in
Secondary Responsibility:
the United States or abroad.
FDIC, OCC, NCUA
Support legislation prohibiting the adoption of any CBDCs in the
United States, including, for example, the Anti-CBDC Surveillance
Congress
State Act, which was passed by the House of Representatives on
July 17, 2025.
Support U.S. technological leadership and competitiveness in capital
markets and work to upgrade domestic payment systems, FMIs, and
cross-border payments; urge other countries to adopt policies that Treasury, FRB, FDIC, OCC,
promote the role of the private sector within a technology-neutral NCUA
regulatory regime.
Examine the extent to which U.S. federal agencies (including the Primary Responsibility:
Banking Agencies) and relevant international financial institutions FRB, Treasury
have engaged in CBDC research or pilot programs contrary to the Secondary Responsibility:
policies set forth in Executive Order No. 14178. FDIC, OCC, NCUA
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Table of Recommendations •
Stablecoins and Payments
Policy Responsibility
Recommendation
Congress Regulator
Promoting the Competitiveness of the U.S. Dollar
Relevant U.S. agencies, including Treasury, should promote
U.S. private sector leadership in the responsible development
of innovative cross-border payments and financial markets Treasury, FRB, FDIC,
technologies. Toward this end, Treasury should consider using OCC, NCUA
its convening authority to encourage and provide clarity to U.S.
financial institutions in leading these efforts.
Treasury and other relevant agencies should promote U.S. leadership
in establishing international legal, regulatory, and technical Primary Responsibility:
standards and best practices for new payments technologies that Treasury, FRB
reflect U.S. interests and values. Standards, including international Secondary Responsibility:
standards, should be calibrated to accurately reflect the risk of FDIC, OCC, NCUA
innovative digital products and services.
Domestically and internationally, U.S. authorities should encourage
payment solutions that: (i) protect the two-tier banking system Primary Responsibility:
and promote the private sector’s role in financial intermediation, Treasury, FRB, OCC
payments, and capital formation; (ii) preserve individual rights and Secondary Responsibility:
limit government control of personal financial information; and (iii) FDIC, NCUA
incorporate robust and effective AML/CFT and sanctions controls.
Treasury, in coordination with other relevant agencies, should Primary Responsibility:
engage with international counterparts and institutions by leading
Treasury, FRB
initiatives to upgrade domestic payment systems, FMIs, and cross-
Secondary Responsibility:
border payment systems, to help protect the primacy of the dollar-
based international monetary system. FDIC, OCC, NCUA
Countering Illicit Finance
Policy Responsibility
Recommendation
Congress Regulator
Improving the AML/CFT and Sanctions Frameworks
Prescribing BSA Obligations
Treasury should faithfully and expeditiously implement the Guiding and Establishing
National Innovation for U.S. Stablecoins Act (GENIUS), which, among other things,
requires Treasury to adopt rules to treat permitted payment stablecoin issuers as
financial institutions under the BSA and to seek public comment and conduct research Treasury
to identify innovative or novel methods, techniques, or strategies that regulated
financial institutions use to detect illicit activity involving digital assets.
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Table of Recommendations •
Countering Illicit Finance
Policy Responsibility
Recommendation
Congress Regulator
Digital asset market structure legislation should consider creating digital asset specific
financial institution types or sub-types within the BSA. Now that GENIUS has been
enacted into law, and pending additional market structure legislation being considered
Treasury
by Congress, FinCEN should evaluate whether and how its existing guidance related
to the digital asset sector, including the guidance issued in 2013 and 2019, should be
rescinded, modified, or updated to reflect legislative and regulatory changes.
• As part of this effort, FinCEN could consider whether additional guidance would be helpful for particular
market segments or for application of particular BSA obligations.
Legislation should consider specifying actors within the decentralized finance
ecosystem that should have AML/CFT obligations, taking into consideration those Congress
actors’ roles in the ecosystem and attendant risks.
Treasury should consider next steps regarding its proposed rulemaking concerning CVC
Treasury
mixing.
Congress should consider clarifying language regarding the BSA’s application to foreign-
located actors, taking into consideration the extent to which a foreign-located actor’s Congress
conduct, and the effect of such conduct on the United States, warrants reach of U.S. law.
Congress should evaluate the self-custody language that is included in CLARITY and
codify the following principles through legislation that reinforce the importance of self- Congress
custody:
• Principle 1: The importance of U.S. individuals maintaining the capability to lawfully hold, or custody, their own
digital assets without a financial intermediary.
• Principle 2: The importance of enabling U.S. individuals to engage in lawful, direct digital asset transfers that
do not involve a financial intermediary with another individual that lawfully self-custodies digital assets.
Congress should codify principles regarding how control over an asset impacts BSA
obligations, particularly for money transmitters, through legislation such as the Congress
Blockchain Regulatory Certainty Act, which has been incorporated into CLARITY.
• Specifically, such legislation could codify that a software provider that does not maintain total independent
control over value is not engaged in money transmission for purposes of the BSA.
Enhancing Effective Supervision
Treasury and the agencies to which it has delegated responsibility for AML/CFT Treasury,
examinations should identify areas of uncertainty for traditional financial institutions FRB, FDIC,
providing services to digital asset actors and digital asset services to customers.
OCC,
Agencies, including Treasury and the Federal banking agencies, should provide needed
guidance or other materials to help clarify AML/CFT obligations and expectations with NCUA, SEC,
regards to those actors and services. CFTC, FHFA
Treasury,
Supervisors should evaluate whether additional compliance tools, training, and internal FRB, FDIC,
resources are needed to ensure examiners can effectively and efficiently evaluate OCC,
institutions’ digital asset-related policies, procedures, and programs. NCUA, SEC,
CFTC, FHFA
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Table of Recommendations •
Countering Illicit Finance
Policy Responsibility
Recommendation
Congress Regulator
Adapting BSA Reporting to Better Account for Digital Assets
Treasury should continue to evaluate modernizing Suspicious Activity Report (SAR)
Treasury
reporting, including the SAR form itself, to ensure it captures highly useful information.
Congress should, through appropriate legislation, ensure that the information required
by statute to be reported to FinCEN for BSA purposes under 31 U.S.C. § 5331 conforms
Congress
with the information required to be reported by statute to the IRS for federal income tax
purposes under 26 U.S.C. § 6050I, as was the case prior to 2021.
Improving Sanctions Compliance with Regard to Digital Assets
Treasury should issue a Request for Information (RFI) to directly solicit sanctions
compliance information, input, and recommendations from industry participants
Treasury
to understand ongoing developments and innovations and gaps in existing OFAC
guidance as well as to identify opportunities for enhanced private sector collaboration.
Treasury should consider revising and updating OFAC’s existing Sanctions Compliance
Guidance for the Virtual Currency Industry brochure, which highlights existing
compliance tools such as traditional sanctions screening and blockchain analytics to Treasury
help improve sanctions compliance by all industry participants, in accordance with
insight gleaned from the RFI process.
Equipping Digital Asset Actors to Mitigate Risk
Enabling Private Sector Investigations
Congress should consider enacting a digital asset-specific “hold law” that offers a
safe harbor to institutions that temporarily and voluntarily hold property involved
Congress
in suspected illegal activity during a short duration investigation. Such a law should
consider transparency when an asset is frozen and consumer protection measures.
Increasing Public-Private Cooperation
Treasury should undertake efforts to encourage greater information sharing, including
through FinCEN’s 314(a) and 314(b) programs. Such efforts should include encouraging
domestic and cross-border information sharing, greater participation in sharing Treasury
programs by digital asset financial institutions and improved information sharing
between digital asset and traditional financial institutions.
Treasury,
Public and private sector participation in real-time information sharing through IVAN DOJ, SEC,
should be encouraged to the extent consistent with legal obligations. CFTC, FRB,
FDIC, OCC
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Table of Recommendations •
Countering Illicit Finance
Policy Responsibility
Recommendation
Congress Regulator
Disrupting and Mitigating Systemic Illicit Finance Risks
Applying Treasury Authorities to Digital Asset Ecosystem
Congress should, consistent with how it has approached Fentanyl and Russian illicit
finance, add a sixth special measure to Section 311 authorizing FinCEN to prohibit,
or impose conditions upon, certain “transmittals of funds” that are not tied to a
Congress
correspondent banking relationship. This would enable Treasury to target foreign digital
asset exchanges or digital asset transactions involving criminal or state actors—without
regard to the nature of their illicit activity.
Treasury should continue to use OFAC’s sanctions authorities, which range from
applying full blocking sanctions to more calibrated restrictions, to target malicious
actors seeking to harm Americans and to limit the access of foreign digital asset actors Treasury
engaged in illicit activity to U.S. markets, in support of the Trump Administration’s
priorities.
Tailoring Law Enforcement Capabilities and Authorities
Congress should evaluate victim compensation regulations and propose amendments
to address concerns regarding victim compensation and improve asset-forfeiture Congress
efforts in the digital assets space.
Congress should tailor 18 U.S.C. § 1014 to protect all financial institutions (defined under
Title 31 of the U.S. Code), including those offering digital asset services. In addition,
Congress should clarify that the law applies to all false statements in connection with
obtaining or maintaining access to services from financial institutions. Relatedly, U.S.S.G. Congress
Section 2B1.1 should be updated to include a sentencing enhancement for making false
statements to financial institutions where the scheme involves significant volume of
criminal funds but no loss to the institution.
Congress should amend the NSPA to clarify that digital assets are property subject to
Congress
this act.
Congress should amend the anti-tip-off provision in 18 U.S.C. § 1510 to update the definition
of “financial institution” from the narrower definition found in 18 U.S.C. § 20 to the broader
definition found in the BSA, 31 U.S.C. §§ 5312(a)(2) and (c), to cover, among other additions,
Congress
certain digital asset firms that operate as money services businesses (MSBs). Congress should
also amend the same anti-tip-off provision to include additional serious underlying offenses
as covered offenses to prohibit agents of financial institutions from tipping off suspects.
Congress should amend 18 U.S.C. § 984 to make certain digital assets subject to the
same modified traceability requirement as exists for cash to allow the government to
seize and forfeit digital assets found in the same wallet used to hold crime-linked digital Congress
assets, without requiring the government to prove the forfeited assets were the exact
same digital assets derived from or used to commit a criminal offense.
STREN GTH EN I N G AMERI CAN LEADERS HIP IN DIGITAL FINANCIAL TECHNOLO GY • 155 •
Table of Recommendations •
Countering Illicit Finance
Policy Responsibility
Recommendation
Congress Regulator
Advancing Privacy through Digital Identity and Related Tools
Treasury should consider coordinating with the National Institute of Standards and Treasury,
Technology (NIST), and other federal agency partners as appropriate, to: Commerce
• Identify emerging approaches to implement customer identification in digital asset scenarios, including
possible applications of the Fourth Revision of the NIST Digital Identity Guidelines (SP 800-63-4) to these
scenarios.
• Evaluate lessons learned in the project “Accelerate Adoption of Digital Identities on Mobile Devices” being
executed in the National Cybersecurity Center of Excellence for applicability to customer identification
programs in digital asset scenarios.
• Evaluate the digital asset ecosystem, including existing identity credentialing tools and technical aspects of
digital asset services, to determine potential approaches for defining, mandating, and enforcing customer
identification programs and evaluate the potential efficacy of such schemes in detecting, deterring, and
investigating fraudulent transactions.
As is required by GENIUS, Treasury should issue an RFI to gather information on
innovative tools to detect illicit activity, including with respect to digital identity Treasury
verification.
Treasury should, in consultation with the federal functional regulators, consider issuing Treasury,
guidance to financial institutions on how they can utilize digital identity solutions within
SEC, CFTC,
their existing customer identification programs. Treasury should ensure that future
FDIC, OCC,
guidance balances secure identity verifications with protection of personally identifiable
information. FRB, NCUA
Taxation
Policy Responsibility
Recommendation
Congress Regulator
Substantive Tax Issues
Treasury and the IRS should publish guidance addressing the determination of “adjusted
financial statement income” (AFSI) with respect to financial accounting unrealized gains
and losses on investment assets other than stock and partnership interests. Toward
Treasury,
this end, the IRS issued Notice 2025-27 stating that Treasury and the IRS anticipate
IRS
interim guidance under CAMT to address how unrealized gains and losses on certain
investment assets reported for financial statement purposes are considered for
purposes of determining AFSI.
Treasury and the IRS should publish guidance addressing whether a trust that otherwise
Treasury,
qualifies as an investment trust treated as a grantor trust fails to qualify as such if the
IRS
trust stakes digital assets owned by the trust.
Treasury and the IRS should publish guidance addressing whether wrapping and Treasury,
unwrapping transactions are taxable transactions. IRS
Treasury,
Treasury and the IRS should update the IRS FAQs on digital assets.
IRS
STREN GTH EN I N G AMERI CAN LEADERS HIP IN DIGITAL FINANCIAL TECHNOLO GY • 156 •
Table of Recommendations •
Taxation
Policy Responsibility
Recommendation
Congress Regulator
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 for federal
income tax purposes. Code provisions that should be expanded to apply to actively
traded fungible digital assets include Sections 475 (mark-to-market election), 864(b)
(trading safe harbors), 1058 (securities loans), and 7704 (publicly traded partnership Congress
rules). In addition, Sections 1091 (wash sale rules) and 1259 (constructive sales) also
should apply to digital assets. Alternatively, legislation could instead clarify when a
digital asset commodity or other digital asset is treated as a security or a commodity for
federal income tax purposes.
Legislation should be enacted that would characterize payment stablecoins for federal
income tax purposes, as such matters are not addressed by GENIUS. If payment
stablecoins are treated as debt, legislation should consider the applicability of existing
Treasury,
federal income tax rules that could impede the widespread use of payment stablecoins Congress
IRS
as financial assets that function in a similar manner to cash-equivalents. In particular,
legislation should address the wash sale and anti-bearer bond rules. To address the
wash sale rules, possible options include:
• Providing that the wash sale rules do not apply to payment stablecoins;
• Providing that the wash sale rules do not apply to de minimis losses from payment stablecoins, possibly up to
an aggregate threshold; or
• Providing that gains and losses on payment stablecoins are not considered for federal income tax purposes.
If no such legislation is enacted, Treasury and the IRS should consider issuing guidance that would clarify the tax
classification of payment stablecoins, and address the potential application of the wash sale and anti-bearer bond rules.
The wash sale rules should be amended to add digital assets to the list of assets
subject to the wash sale rules. If legislation of this kind is enacted, the broker reporting
Congress
regulations should be amended to reflect these changes to the wash sale rules. Further,
the wash sale rules should not apply to payment stablecoins.
Legislation should be enacted to amend Section 1058 to provide that it applies to loans
of actively traded fungible digital assets, provided that the loan has terms similar to
those currently required for loans of securities. The Secretary of the Treasury should be Congress Treasury
granted authority to determine when a digital asset is actively traded, and to address
differences between the standard terms of securities loans and crypto loans.
Taxpayer Reporting
Treasury and the IRS should issue administrative guidance that addresses de minimis
Treasury,
receipts of digital assets. The guidance could apply to airdrops, staking, hard forks, and
IRS
mining rewards for taxpayers who do not operate a node or carry out digital asset mining.
Treasury and the IRS should review previously issued guidance related to the timing of
income from staking and mining and consider whether to clarify, modify, or reverse that Treasury,
guidance, taking into account any recent intervening developments since the issuance IRS
of such guidance.
If Congress decides to pass legislation regarding the timing of the inclusion of income
relating to mining or staking, Congress should consider whether similar rules should
apply to rewards from other digital asset validation methods, what the character of
income upon disposition should be and if ordinary, what rules should apply to determine Congress
the order of dispositions of ordinary versus capital units, and potential differences
between the fair market value of rewards at the time of receipt compared with the fair
market value of rewards at the time of sale or other disposition.
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Table of Recommendations •
Taxation
Policy Responsibility
Recommendation
Congress Regulator
Legislation could be enacted that would require taxpayers to report foreign digital asset
accounts. A foreign digital asset account would be a custodial account that holds digital
assets that is maintained by a foreign digital asset exchange or other foreign digital asset
Congress
service provider. If the United States implements the Crypto-Asset Reporting Framework
(CARF), taxpayers could be required to report accounts with foreign crypto-asset service
providers that are required to report information on U.S. customers to a non-U.S. tax authority.
Legislation could be enacted that would streamline the reporting required under
Section 6038D and on the FBAR. Legislation could permit a taxpayer that is subject to
Congress
both reporting obligations to submit a single form that would be available both to the
IRS and to FinCEN.
Third-Party Information Reporting
Treasury and the IRS should propose regulations that provide brokers that facilitate
sales or exchanges of digital assets through electronic means with a less burdensome Treasury,
method of obtaining consent from their customers to furnish Form 1099-DA payee IRS
statements in an electronic format.
Treasury should consider proposing regulations to implement CARF that take
stakeholder concerns into account and minimize burdens on brokers to the extent
Treasury,
consistent with CARF rules. The proposed regulations should not impose any new
IRS
reporting requirements on DeFi transactions and should be used as a forum to gather
further feedback, including a reasonable timetable for CARF implementation.
Treasury and the IRS should consider proposing regulations requiring basis information
Treasury,
to be reported when digital assets are transferred between centralized digital asset
IRS
exchanges.
Treasury and the IRS should consider proposing regulations implementing reporting of
Treasury,
digital assets paid to a trade or business in a manner that takes stakeholder concerns
IRS
into account.
Consideration should be given to legislation to conform the information required to be
reported to FinCEN, for BSA purposes, and the IRS, for federal income tax purposes. The
legislation could also reexamine the reporting dollar thresholds and the breadth of uses Congress
of digital assets to which this provision would apply.
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Table of Recommendations •
Miscellaneous Recommendations
Policy Responsibility
Recommendation
Congress Regulator
Cybersecurity
The Working Group recommends that relevant agencies develop principles-
based requirements and standards, as appropriate, for digital asset firms. Treasury, SEC,
Such principles-based requirements and standards should take into account CFTC, FRB, FDIC,
the various activities and related risks of various industry participants to OCC, NCUA
strengthen industry’s protection from malicious cyber actors.
The Working Group recommends that relevant agencies consider measures Treasury, SEC,
to increase information sharing on potential threats across the private sector CFTC, FRB, FDIC,
and between the public and private sectors. OCC, NCUA
Treasury’s OCCIP could work with industry to identify opportunities to
increase information sharing on cybersecurity risks, including by providing Treasury
U.S. regulated digital asset firms access to the ATIF.
Treasury’s OCCIP—through the existing public-private partnership
structure—could explore identifying gaps in addressing operational resiliency Treasury
of digital asset firms to enable broader adoption.
Repatriation and Domestication of Offshore Foundations
The Working Group encourages non-profit organizations supporting the
development of blockchain technologies to domicile in the United States. Working Group,
Toward this end, the Working Group will engage with Treasury and the IRS to Congress
Treasury, IRS
study ways to incentivize their repatriation and domestication.
STREN GTH EN I N G AMERI CAN L EA DERS HIP IN DIGITAL FINANCIAL TECHNOLO GY • 159 •
Table of Recommendations •
Cementing U.S. Leadership through the Bitcoin Strategic Reserve
and U.S. Digital Asset Stockpile
Under President Trump’s Executive Order No. 14178, the Working Group shall “evaluate the potential
creation and maintenance of a national digital asset stockpile and propose criteria for establishing such
a stockpile, potentially derived from cryptocurrencies lawfully seized by the U.S. Government through
its law enforcement efforts.”494 On March 6, 2025, the President issued Executive Order No. 14233,
which clarified and expanded on this directive and provided that it is the policy of the United States to
establish a Strategic Bitcoin Reserve (the “Reserve”) and a United States Digital Asset Stockpile (the
“Stockpile”).495
Consistent with the framework established by these executive orders:
■ The Reserve and the Stockpile will be administered by Treasury, which will establish an office to
administer and maintain control of the associated custodial accounts
■ The Reserve and the Stockpile will be capitalized by forfeited digital assets—in other words, digital
assets owned by the U.S. government.
■ However, forfeited digital assets needed to satisfy statutory objectives will continue to be used for
those objectives, including to compensate identifiable and verifiable victims of crimes, to support
law enforcement operations, to be equitably shared with state and local law enforcement partners,
and to fulfill other statutory forfeiture program requirements.
■ The bitcoin in the Reserve will generally not be sold and will be maintained as reserve assets of the
United States utilized to meet governmental objectives in accordance with applicable law.
◆ Treasury and Commerce will develop strategies that could be used to acquire additional
bitcoin496 for the Reserve in ways that are budget neutral and do not impose incremental costs
on United States taxpayers.
■ Custody will be studied by Treasury and Commerce in order to safeguard the assets of the United
States.
Pursuant to Section 3(e) of Executive Order No. 14233, Treasury delivered considerations to the White
House regarding the establishment and management of the Reserve and the Stockpile. Treasury will
continue to coordinate with the White House and other members of the Working Group to move
forward with appropriate next steps to operationalize the Reserve and the Stockpile for the benefit of
the United States government and taxpayers.497
494 Exec. Order No. 14178, supra note 2, at § 4(c)(2).
495 Exec. Order No. 14233, Establishment of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile, 90 Fed. Reg. 11789 (Mar. 6, 2025).
496 Bitcoin enthusiasts use the phrase “stacking sats” to describe acquiring incremental amounts of bitcoin. “Sat” is short for “Satoshi,” the smallest possible
unit of bitcoin the network can accommodate (0.00000001 bitcoin). See Stack the Sats Meaning, Ledger Academy (Mar. 2024), https://www.ledger.com/
academy/glossary/stack-the-sats.
497 See Exec. Order No. 14233, supra note 495, at § 3(e). See Exec. Order No. 14233, supra note 495, at § 3(e).
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