US Crypto Policy Risk: What Changes Under the New Administration Mean for Tokenization

US crypto policy entered 2025 differently from how it left 2024. The change of administration brought a stated commitment to more accommodating crypto regulation — executive orders, task forces, and reversed SEC staff guidance. The institutional tokenization market responded with cautious optimism. Compliance teams, whose job is to manage policy risk rather than celebrate it, should be more measured.

This analysis examines what actually changed in January-February 2025, what the likely regulatory agenda looks like for 2025-2026, where the residual risks and uncertainties sit, and what institutional tokenization programmes should do in response.

What Actually Changed in January 2025

SAB 122: The Most Consequential Reversal

The single most consequential regulatory change for institutional tokenization in January 2025 was the reversal of SEC Staff Accounting Bulletin 121 (SAB 121) by SAB 122. This requires explanation because it was a technical accounting matter with enormous practical consequences.

SAB 121, issued in March 2022, required entities that hold crypto assets in custody for clients to recognise a liability on their balance sheet equal to the fair value of those assets. In conventional custody (holding bonds, equities, commodities), custodians do not recognise custodied assets as liabilities — they are off-balance sheet client assets. SAB 121 treated crypto assets differently: because of what the SEC characterised as heightened technological and legal risk, the custodied crypto had to appear on the balance sheet as a liability.

The balance sheet treatment had two devastating effects on bank crypto custody economics. First, it increased capital requirements: balance sheet liabilities require regulatory capital against them, meaning every dollar of crypto held in custody required the bank to hold additional regulatory capital, dramatically reducing the return on equity of the custody business. Second, it triggered concerns from bank regulators (OCC, Federal Reserve, FDIC) who were generally unenthusiastic about large quantities of digital asset liabilities appearing on bank balance sheets.

The practical result: BNY Mellon received regulatory approval to custody crypto in October 2022 but could not scale the business at economical unit economics. Other major bank custodians — State Street, JPMorgan — declined to enter the digital asset custody market in force, citing SAB 121 as a primary obstacle.

SAB 122’s reversal of SAB 121 removes this impediment. Bank custodians can now hold digital assets in custody on behalf of clients without the balance sheet liability treatment. The return on equity of digital asset custody business is now comparable to conventional custody — which means bank custodians have a business incentive to enter the market aggressively.

Compliance implication: The SAB 122 reversal will accelerate bank custodian entry into digital asset custody significantly in 2025-2026. For tokenization programmes, this means deeper institutional custody infrastructure will become available — more regulated custodians, more competitive pricing, and greater institutional investor comfort with the custody of tokenized assets. Programmes that currently rely on specialist crypto custodians may have access to bank custodian infrastructure within 12-24 months.

The Crypto Asset Task Force: Structure Without Mandate

The Crypto Asset Task Force, established within the SEC in early 2025, is a coordinating body rather than a rule-making entity. It does not have the authority to issue rules, guidance, or exemptions — it can recommend priorities and approaches to the Commission, which retains final authority.

The Task Force’s stated agenda includes developing a regulatory framework for digital assets that distinguishes commodities from securities more clearly, creating pathways for SEC registration of crypto exchanges, and addressing the tokenized securities market. These are the right issues; the Task Force’s ability to resolve them depends on the broader Commission’s willingness to act and Congress’s willingness to legislate where Commission authority is genuinely ambiguous.

The compliance implication of the Task Force is limited in the near term: it signals direction (more accommodating) without yet producing the rules, exemptions, or bright-line guidance that compliance programmes can act on. Track its output, do not rely on its intentions.

Enforcement Posture Shift: Real, but Not a Free Pass

The change in SEC enforcement posture on crypto is genuine. The Commission has paused several ongoing investigations into crypto exchanges and token issuers and has indicated a preference for providing regulatory clarity through rulemaking rather than enforcement action. The Wells notices issued to several major crypto companies in 2023-2024 were resolved or withdrawn.

This is relevant for tokenization programmes in one specific way: it reduces the enforcement risk of operating in legal grey areas while waiting for regulatory clarity. But it does not eliminate the underlying legal exposure. The Howey test has not changed. The Securities Act’s Section 5 prohibition on unregistered securities offerings has not been amended. A transaction that constitutes an unregistered securities offering under existing law remains an unregistered offering — the enforcement posture shift affects how likely the SEC is to pursue a case, not whether a legal violation has occurred.

Compliance programmes that treat the posture shift as substantive regulatory relief are making a significant error. The legal obligations remain; the enforcement probability has declined. These are different variables.

FIT21: The Legislative Status

The Financial Innovation and Technology for the 21st Century Act (FIT21) passed the US House of Representatives in May 2024 with bipartisan support — a rare bipartisan vote on crypto legislation. As of early 2026, the Senate had not scheduled FIT21 for a floor vote, and Senate leadership had not indicated a timeline for consideration.

FIT21 represents the most detailed legislative proposal for a comprehensive US crypto regulatory framework. Its key provisions include:

Securities vs commodities classification: FIT21 proposes a functional test for determining whether a digital asset is a security (subject to SEC jurisdiction) or a commodity (subject to CFTC jurisdiction). The test turns on “sufficient decentralisation” — a concept that, if enacted, would provide clearer bright lines than the current Howey-based case-by-case analysis, but that creates its own definitional complexities around what constitutes sufficient decentralisation.

SEC registration pathways: FIT21 would create a new registration pathway for digital asset exchanges that trade both securities tokens and commodity tokens — a gap in current law that requires exchanges to be separately registered with SEC and CFTC for different asset categories.

Retail protections: FIT21 includes retail investor protections for digital asset transactions, including disclosure requirements and suitability assessments that are not currently required for commodity token transactions.

What FIT21 does not address: FIT21 does not comprehensively address tokenized securities — traditional securities (equities, bonds) represented as tokens on a blockchain. These remain within the existing SEC framework; FIT21 addresses primarily native crypto assets. Tokenized traditional securities still require Securities Act compliance and would not benefit materially from FIT21 as drafted.

Senate prospects: The Senate’s failure to advance FIT21 in 2024 reflected both scheduling constraints and substantive disagreements on the decentralisation test and jurisdiction-sharing between SEC and CFTC. The current administration has expressed support for legislation, and Treasury and SEC officials have been more publicly engaged in legislative discussions, but Senate passage in 2025 is not certain. The Senate’s legislative calendar is crowded, and crypto legislation competes with other financial regulation priorities.

Compliance implication of FIT21 uncertainty: Do not design tokenization programmes around FIT21’s provisions unless and until it is signed into law and implementing regulations are issued. The legislative process is long, the final text may differ materially from the House-passed version, and implementing regulations would be required before the new framework is operational. Design programmes under existing law.

The State vs Federal Jurisdiction Tension

One of the underappreciated complexity factors in US crypto regulation is the ongoing tension between state-level and federal-level regulatory frameworks.

Several states — New York (NYDFS BitLicense), Wyoming, Texas, and others — have enacted state-level crypto regulatory frameworks that coexist with federal requirements. The New York BitLicense, issued by NYDFS since 2015, is arguably the most stringent state-level crypto regulation globally and has been a gateway requirement for any firm serving New York residents.

The complexity for tokenization programmes arises from the multiple layers:

Federal securities law (SEC): Applies to securities tokens regardless of state of operation or investor location.

Federal commodities law (CFTC): Applies to commodity tokens and derivatives.

Federal AML (FinCEN/BSA): Applies to money services businesses regardless of state.

State money transmission law: Many tokenization-related activities — exchanging tokens, holding crypto as custodian — may constitute money transmission under state law, requiring money transmitter licences in each state where clients are located. 50 states, 50 different money transmission frameworks.

New York BitLicense: A separate requirement for any firm conducting virtual currency business with New York residents, on top of federal requirements.

For institutional tokenization programmes targeting US investors, this multi-layer structure creates compliance planning requirements that are more complex than any other major jurisdiction. The compliance cost of multi-state money transmitter licensing alone — often cited at $1-3 million for a comprehensive 50-state programme — is a material entry barrier.

The OCC’s limited-purpose charter: The Office of the Comptroller of the Currency has authority to charter national banks with limited purposes, including a fintech charter and a trust bank charter that could serve as alternatives to state-by-state licensing for certain digital asset custody and payment functions. The legal status of the OCC fintech charter has been contested in courts, with state banking regulators challenging the OCC’s authority. This is an area where legislative clarification at the federal level would significantly reduce compliance complexity.

2025-2026 Regulatory Priorities: What to Watch

Based on the policy direction signals from the administration and the Task Force’s stated agenda, the compliance community should monitor these specific developments in 2025-2026:

SEC safe harbour or exemptive order for tokenized securities: The most significant potential development for institutional tokenization is SEC action — either through rule or exemptive order — providing clarity on the conditions under which a security may be issued in tokenized form on a DLT without triggering requirements that are technically incompatible with blockchain architecture (e.g., requirements designed for paper certificate issuance). Several market participants have petitioned the SEC for such guidance; the current Commission appears more receptive than its predecessor.

CFTC digital asset derivatives framework: CFTC has jurisdiction over crypto derivatives. As institutional tokenization programmes expand into structured products with derivative components, CFTC jurisdiction becomes increasingly relevant. CFTC has been more consistently accommodating of digital asset market development than the SEC; expect continued CFTC engagement through guidance and potentially rulemaking.

Bank regulator guidance on tokenized deposits: The intersection of tokenized deposits (bank liabilities represented as tokens) and existing bank regulation — capital requirements, deposit insurance, payment system access — requires regulatory guidance from the Federal Reserve, OCC, and FDIC. The OCC has been more active here than the Federal Reserve; watch for OCC interpretive letters addressing tokenized deposit structures.

FinCEN Travel Rule technical standards: FinCEN has been deliberate in implementing the Travel Rule for VASPs. Technical standards for Travel Rule implementation — the messaging standards and identification requirements — are still developing. Finalisation of these standards would reduce the current uncertainty in Travel Rule compliance implementation.

The policy risk environment in the US has improved materially since January 2025. The residual risks — legislative gridlock on FIT21, SEC enforcement posture that could shift with Commission personnel changes, state-federal jurisdiction complexity — are real and require active monitoring. For the global regulatory comparison, see /tracker/global-regulatory-readiness/.