Making Sense of Trump’s Crypto Executive Order

It took a mere four days back in office for President Trump to issue his Executive Order, “Strengthening American Leadership in Digital Financial Technology.” Somehow it managed to qualify as a bit of a letdown for some crypto enthusiasts who had become convinced their cause was a high enough priority to warrant a mention in the inaugural address.

The price of Bitcoin actually fell slightly in the days following the Order’s January 23 release. Perhaps its contents were already reflected in the price run-up over the prior two months. It’s also possible the order didn’t go as far as crypto’s true believers had hoped. Regardless, it unquestionably represents the most pro-digital asset stance taken to date by the US government.
Let’s dissect the components of the Executive Order- as well as a ride-along SEC rule change- with an eye toward their impact on financial institutions.

In broad terms, the order’s stated goal of “support(ing) the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy” is a mission few are likely to oppose. The most concrete steps in that direction are probably in the stablecoin realm.

The Executive Order establishes a Digital Asset Markets Working Group. One of its tasks is to “propose a Federal regulatory framework governing the issuance and operation of digital assets, including stablecoins, in the United States” (added emphasis is mine). It’s notable that while the word “Bitcoin” does not appear anywhere in the order- favoring the more inclusive “digital assets”- while stablecoins are cited on multiple occasions.

For instance, the order states that the Administration’s policy includes “promoting and protecting the sovereignty of the United States dollar, including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide.” In our recent BIGCast with BankSocial COO Becky Reed we discussed how stablecoins are already a vehicle for global dollar transaction value rivaling the Visa network.

And I do mean “dollar,” as the overwhelming majority of stablecoins are dollar-backed- creating additional demand for US Treasury notes to backstop these coins. My friend Jeff Gapusan points out that the Treasury holdings of stablecoin issuers in aggregate approaches Brazil’s investment level. (Jeff’s insightful take on the executive order can be found here).

A bizarre callout in the order is the Administration’s pledge to “(take) measures to protect Americans from the risks of Central Bank Digital Currencies (CBDCs), which threaten the stability of the financial system, individual privacy, and the sovereignty of the United States.” This reads as political posturing in my view, given that the Fed has stated on multiple occasions that it has no CBDC initiatives underway and that it will not pursue one without a literal act of Congress. There’s a valid debate on CBDC to be had, but this declaration does little to advance the conversation while countries like China proceed with their efforts.

One area that may fall short of the crypto lobby’s aspirations is the so-called “Strategic Bitcoin Reserve.” Although the working group is asked to “evaluate the potential creation and maintenance of a national digital asset stockpile,” it stops well short of mandating its creation and also widens the aperture beyond Bitcoin. A formal reserve would immediately alter the supply/demand equation in Bitcoin’s favor. It may well still happen, especially with champions like new Treasury head Scott Bessent and Trump’s “Crpyto Czar” David Sacks on the working group, but now sounds like a longer slog.

It’s often overlooked that the US already has a de facto crypto stockpile, comprised of assets (mostly Bitcoin, with some other coins as well) confiscated from illegal actors. The Biden Administration seemed on the verge of liquidating these holdings, but it’s now a safe assumption they’ll remain on the government’s books for the foreseeable future.

Another unusual inclusion calls for “protecting and promoting the ability of individual citizens and private-sector entities alike to access and use for lawful purposes open public blockchain networks without persecution, including… to transact with other persons without unlawful censorship, and to maintain self-custody of digital assets.” This may be a shot across the bough against the FDIC, which some in the crypto community accuse of strong-arm “de-banking” tactics against crypto innovators.

By contrast, the NCUA took a less strident stance, leading a handful of CUs to venture into Bitcoin buy/sell/hold services a few years back. As Becky noted on our podcast we may face a “once burned, twice shy” dynamic for some period. On the self-custody front, however, she has long been an advocate of the “not your keys, not your crypto” credo.

Separate from the Executive Order the SEC rescinded the Biden-era Staff Accounting Bulletin 121, which required companies holding crypto on behalf of clients to reflect it as a liability on their balance sheet- a position that increased the risk profile for banks and credit unions, causing them to steer clear. Crypto’s regulatory framework remains to be formalized, but this SAB change is a strong indicator of the path ahead and is probably the most important factor for FIs to consider in the near term.