Authors & Acknowledgements
Alex Thorn, Head of Firmwide Research
Chris Rhine, Head of Liquid Active Strategies
Jianing Wu, Research Associate
Introduction
Last week marked a historic moment for the crypto industry as President Trump took office and signed an executive order establishing the federal government’s approach to digital assets. Key developments include the SEC repealing SAB121, allowing banks to custody assets, and the creation of a new SEC crypto task force called “Crypto 2.0.” These actions, alongside a series of positive statements from the new administration and Congress, signal the emergence of a clear and supportive regulatory framework.
With a regulatory framework being established, traditional finance will unlock opportunities, impacting various aspects of financial services, including banking, asset management, sales and trading, and corporate operations. For example, just this week, Morgan Stanley mentioned that they are exploring crypto services and BlackRock’s CEO Larry Fink revealed sovereign wealth funds’ interest in bitcoin allocations.
Below we summarize a timeline of recent events since President Trump took the oath of office at noon on Jan. 20:
Monday, January 20
Trump named Commissioner Caroline Pham, who once proposed pilot programs to regulate crypto and has criticized the SEC’s approach to crypto regulation, as Acting Chair of the CFTC. Upon receiving the appointment, Pham wrote that “it’s time for the CFTC to get back to the basics.”
Trump named Vice Chair Travis Hill to be Acting Chair of the Federal Deposit Insurance Corporation (FDIC), taking over for Marty Gruenberg, who had helmed the agency for nearly 20 years and recently came under fire for widespread harassment scandals and Operation Chokepoint 2.0. In a press release Tuesday, Acting Chair Hill wrote that one of the matters he expects “the FDIC to focus on in the coming weeks and months” was to “adopt a more open-minded approach to innovation and technology adoption, including a more transparent approach to fintech partnerships and to digital assets and tokenization.”
Tuesday, January 21
Trump named Commissioner Mark Uyeda, staunch critic of the last administration’s approach to digital assets, Acting Chairman of the Securities & Exchange Commission (SEC)
Uyeda then announced “Crypto 2.0” - a new SEC crypto task force led by Commissioner Hester Peirce, one of the most eloquent and prolific advocates for a progressive approach to digital asset regulation. According to the SEC, “the Task Force’s focus will be to help the Commission draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously.
Trump issued a “full and unconditional pardon” to Ross Ulbricht, the creator of Silk Road, the darkweb marketplace that only accepted BTC for transactions. Ulbricht left federal prison on Tuesday night after 12 years behind bars after being imprisoned for operating the marketplace that had no restrictions on the items that could be bought or sold, including drugs or weapons. Ulbricht made his first public comments on X Thursday since leaving prison. In pardoning Ulbricht, Trump fulfilled a promise made repeatedly throughout the campaign to Bitcoiners and Libertarians
Wednesday, January 22
Coinbase filed an appeal at the Second Circuit Court of Appeals regarding the secondary trading of digital assets. The appeal comes after the U.S. District Court for the Southern District of New York (“SDNY”), which is currently hearing the SEC’s case against Coinbase, granted Coinbase the rare opportunity to file an interlocutory appeal – the right to argue before its trial in front of the appeals court that the case should be dismissed.
Thursday, January 23
Trump signed the “Strengthening American Leadership in Digital Financial Technology” EO, known as the “crypto EO,” which recognized crypto’s “crucial role” in fostering innovation and economic development. The order revokes Fmr. Pres. Biden’s own crypto EO (14067); makes it national policy to promote and protect self-custody, the rights to blockchain access, mining, validating, and uncensored transactions; prohibits the creation of a U.S. central bank digital currency; provide regulatory clarity and certainty based on “technology-neutral regulations”; and establishes a presidential working group to study the creation of a “national digital assets stockpile,” among other activities.
The SEC issued Staff Accounting Bulletin (SAB) 122, which specifically rescinds the interpretive guidance from March 2022’s infamous SAB 121 that effectively prohibited banks from custodying client cryptoassets.
Cynthia Lummis (R-WY), longtime advocate for bitcoin and digital assets, was named chair of the Senate Banking Subcommittee on Digital Assets.
From the Crypto Ball last Friday, which we co-sponsored and attended, through the issuance of Thursday’s crypto EO, the last week has seen a whirlwind of activity. It is clear, after just a few days, that President Trump intends to take a very different approach to digital assets policy in America than his predecessor. The war against crypto is over – now it is time to rebuild. While we are optimistic about the new regime for crypto in America, there is much work to be done and myriad stakeholders to include, reckon with, appease, consult, and appeal.
The executive action represents a great step forward for executive policy on digital assets. The order explicitly makes it the policy of the United States that: self-custody, mining, validating, and transactional freedom should be protected; banks should not prevent lawful individuals or companies from fair access; the government must establish clear and progressive regulatory frameworks; and that the government should study whether and how to create a national digital assets stockpile. Coordinating all this will be difficult and the new Presidential Working Group (PWG) on Digital Asset Markets will have its hands full. The extent to which this PWG is successful will hinge on a combination of its abilities to balance stakeholder needs, promote and support policymaking from within the federal agencies, and maintain credibility in the White House.
The lack of specificity in the EO on the “strategic bitcoin reserve” (SBR) caused Bitcoin to dip on the release of the order, with many in the bitcoin community upset at the use of the term “digital assets.” If we're keeping score, studying and creating the stockpile but not buying it is explicitly is what we predicted would happen in our 2025 predictions report, where Galaxy Research wrote on Dec. 27, 2024: “The U.S. government will not purchase Bitcoin in 2025, but it will create a stockpile using coins it already holds, and there will be some movement within the departments and agencies to examine an expanded Bitcoin reserve policy.” We don’t know if a more expanded reserve policy that includes purchases will be enacted, or which coins (if any) will become part of a national stockpile, but for now the content of this executive order is exactly what we expected. There’s still a lot of time for more to happen – after all, it’s only day three of Trump’s second presidency. In any case, we view a stockpile alone as extremely bullish.
It’s important to step back and take stock of the monumental shift before us. In our view, the sweeping nature of the EO represents a giant leap forward and clearly signals the White House’s intention to promote digital asset usage, adoption, markets, and more. When compared to Fmr. Pres. Biden’s 2022 crypto EO (which Trump’s EO rescinded), Trump’s EO is a world apart. Biden’s executive order, titled “Ensuring Responsible Development of Digital Assets,” made it U.S. policy to protect consumers, maintain global financial stability and mitigate systemic risk, mitigate illicit finance, and promote access to safe and affordable financial services. Only two of the six priorities mentioned competitiveness or innovation. Contrast that with Trump’s priorities, which are significantly more aligned with the desires of the crypto world. While the executive order doesn’t accomplish everything, and is not as durable as formal rulemaking or legislation, it nonetheless signals that President Trump was serious about moving the U.S. into a digital golden era.
The significant change in regulatory environment will have profound impacts to the investment landscape. We expect that numerous crypto companies will IPO over the next few years, allowing equity investors to have broader access to the industry’s secular growth. M&A is likely to see increased activity as large financial and technology incumbents look to acquire key technologies, products, and companies to accelerate their competitive edge. A surge in new use cases will unfold as companies will no longer be restricted from using public blockchains, and the fear of punitive regulatory actions subsides. This will lead to increased transaction activity on blockchains, highlighting an opportunity for certain crypto protocols that serve as critical infrastructure for facilitating these transactions.
Building on these developments, a robust regulatory framework for digital assets will further open the door for more institutional investments. Last year, BTC spot ETFs and ETH spot ETFs were launched. This year, we expect a wider range of ETF offerings to be approved and launched, including single-cryptocurrency strategies, leveraged or inverse strategies, diversified basket strategies, and even yield-bearing strategies, catering to various classes of investors. As these diverse ETF strategies gain traction, digital asset allocations are expected to become a normalized part of investors’ portfolios. This inflow of capital from institutions may in turn reduce volatility of digital assets, making it a more enticing asset class that captures technological innovation and growth, to be invested in.
In conclusion, entering the digital golden era, the United States is on a path to embrace crypto technology. Investors should be prepared for a significant shift in sentiment for the asset class and consider looking for opportunities that are suitable for their investment objectives and risk profile. Galaxy Asset Management is prepared for this moment, and we look forward to working with our partners and investors to capitalize on this opportunity.
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