Positive signs for institutional investment in cryptocurrencies

President Trump’s second administration charted a new landscape for digital assets and cryptocurrencies in the United States in the first week. Executive and regulatory actions have reshaped the course of development of digital asset technology in the United States: the executive order entitled “Strengthening American Leadership in Digital Financial Technology” and the SEC’s repeal of the SEC. Staff Accounting Bulletin No. 121 (SAB 121).

Together, these measures set a positive tone for institutional investment in cryptocurrencies by providing clearer regulatory frameworks and reducing compliance burdens. Collectively, these actions have significantly enhanced the signal-to-noise ratio of the digital assets industry, encouraging greater institutional participation.

Executive Order: Strengthening U.S. Leadership in Digital Financial Technology

On January 23, 2025, President Trump signed the Executive Order”Strengthening American leadership in digital financial technology“Identifying a pivotal moment for the US digital asset industry.

Unlike previous years when cryptocurrency companies developed and innovated under fear of enforcement action, the order underscores the importance of innovating and evolving the regulatory frameworks under which they operate. The executive order encourages the development and use of digital assets, emphasizing their ability to drive innovation and economic growth.

In his speech at the World Economic Forum in Davos, Switzerland, President Trump also reiterated his administration’s “America First” stance on storm technologies including cryptocurrency. Referring to the country’s oil and gas reserves, Trump emphasized the goal of harnessing those assets, “turning America into a . . . global hub for AI and crypto.”

The first Bitcoin (or cryptocurrency) president?

In July 2024, then-candidate Trump highlighted his strong support for the digital asset space in Bitcoin Conference 2024 In Nashville, Tennessee. There, he gave a rousing speech that appealed to Bitcoin enthusiasts as a voting bloc. Touching on a number of topics ranging from the strategic Bitcoin reserve to deregulating Ross Ulbricht, Trump struck a chord with the pro-House crowd.

While estimates of cryptocurrency ownership in the United States vary, the pool of voters who own US cryptocurrency may be as high as 20 million people. While this is broadly consistent with what is commonly viewed as a liberal public, later studies have indicated no relationship between Bitcoin ownership and political leaning.

However, the executive order emphasizes protecting individual rights (a libertarian mainstay) while promoting the development of new technologies (a pro-business, usually conservative, nod). Specifically, the order ensures that individuals and private sector entities can access open public blockchain networks without fear of persecution to develop software, engage in mining activities, and maintain their own needs for digital assets.

StableCoins: Building blocks for Fintech development

Supporting the growth of Stablecoins backed by the dollar is legal and legitimate. It lends credence to the claim that building a strong StableCoin ecosystem can support the US Treasury market and strengthen the US dollar’s position in the global digital economy.

As of January 2023, USD-offered stablecoins comprised approximately 99% of the total StableCoin market. Since that time, the market cap of StableCoins has grown from $138 billion to Nearly $222 billion today. If Stablecoin issuers were a single investor, they would be The eighteenth largest holder of US Treasury years Today, Brazil is just behind at $228 billion.

in October 2024 Report The US Treasury highlighted increased demand in shorted Treasuries from StableCoin issuers. Recently, OKG Research predicted that the StableCoin market will grow beyond $400 billion in 2025, further boosting supply in the treasury market.

Perhaps the most compelling section of the executive order is its ban on the creation, issuance, trading, and use of central bank digital currencies (CBDCs) within the United States. This decision reflects the US position to pursue leadership in promoting decentralized digital assets over centralized digital currencies.

SAB 121: Classification of cryptocurrencies as liabilities

The second most important piece of activity is the repeal of SEC Accounting Bulletin No. 121 (SAB 121).

Issued by the SEC in 2022, SAB 121 requires companies that hold cryptocurrencies on behalf of clients to classify these assets as liabilities on their balance sheets. When banks hold securities for customers, they are not recorded as assets or liabilities on the bank’s balance sheet, but are only disclosed in the corresponding financial statement notes.

After a radical departure from the mainstream market view, cryptocurrencies were not recognized as assets under SAB 121. This created significant challenges for financial institutions.

By classifying cryptocurrencies as liabilities (as opposed to assets), financial institutions have faced increased compliance costs and complexity in financial reporting, deterring their efforts to integrate digital assets into their operations and product mix.

Facing increasing levels of risk, regulatory scrutiny, and the potential for adverse financial impacts has disengaged many institutions from dealing with cryptocurrencies and cryptocurrency businesses, limiting the growth and adoption of digital assets within the traditional US financial system.

Repeal of SAB 121: A positive shift

Citing industry feedback amid the evolving digital asset landscape, the SEC rescinded SAB 121 and introduced SAB 122 last Thursday.

The new bulletin allows companies to use broader accounting standards to evaluate their options and obligations to protect client assets and account for potential losses as contingent liabilities.

The new directive also provides banks and other financial institutions with greater flexibility, allowing them to offer crypto custody services without the compliance burdens imposed by SAB 121.

The repeal of SAB 121 reduced the perceived risks and complexities associated with holding cryptocurrencies, making it more attractive for financial institutions to provide digital asset services.

SAB 122’s treatment of contingent liabilities and assets is more closely aligned with widely accepted accounting standards set by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board. This also reduces the perceived risks and complexities associated with holding cryptocurrencies, making it more attractive for financial institutions to provide digital asset services.

Paving the way for institutional investment

The signing of the “Strengthening U.S. Leadership in Digital FinTech” Executive Order and the SEC’s repeal of SAB 121 provide collective positive signals for institutional investment in digital assets.

By creating clearer language around digital asset policy, the Trump administration has opened the door for innovation to return to the wild. Removing the accounting challenges surrounding digital assets supports this view and removes real-world administrative hurdles for companies in dealing with the asset.

However, there is still a significant amount of work to further institutional participation in the space. The actions show the way for greater institutional engagement and engagement with digital assets, without fear of negative enforcement actions.

This will allow the creation of a robust infrastructure and framework that resembles the markets in which institutional investors currently operate.

There is no doubt that innovation in cryptocurrencies will continue. This week’s activity has ensured the potential for this to happen on shore, led by the United States and its vibrant financial institutions.