New Legislation Introduced, Federal Reserve Revises Guidance and SEC Hosts Custody Roundtable

Congress is back in session this week after a two-week recess. Several new pieces of legislation were introduced, including one directing the secretary of commerce to spearhead federal blockchain policy initiatives, another to help law enforcement combat financial scams and a third to amend taxation of digital assets in Puerto Rico.

On the regulatory front, the Federal Reserve Board rescinded prior supervisory guidance related to crypto-asset and dollar token activities, signaling a shift toward treating crypto activities under the standard supervisory framework.

Meanwhile, the SEC hosted its third public roundtable on crypto custody. In his first public appearance as SEC chair, Paul Atkins opened the roundtable by emphasizing the need to modernize the SEC’s custody framework to accommodate crypto assets and blockchain technology. According to news reports, Atkins stated that the SEC has ample room to maneuver in regulating digital assets under the existing laws without the need for immediate congressional action, but noted that congressional input would be beneficial. The SEC plans to continue advancing regulatory efforts in parallel with ongoing legislative developments.

Separately, the CFTC issued a public request for comment on whether derivatives markets should expand to 24/7 trading, driven in part by the crypto markets. Internationally, El Salvador’s digital asset regulator met with the SEC’s Crypto Task Force to propose a cross-border regulatory sandbox, highlighting opportunities for international collaboration on emerging digital asset regulatory models.

Legislative Updates

Deploying American Blockchains Act of 2025

• On April 17, Sen. Bernie Moreno (R-OH) introduced the “Deploying American Blockchains Act of 2025” (S. 1492), a bipartisan bill that would direct the secretary of commerce to lead federal policy initiatives related to blockchain and establish a National Blockchain Deployment Advisory Committee to guide blockchain integration across industries.
• The bill, cosponsored by Sens. Tim Sheehy (R-MT) and Lisa Blunt Rochester (D-DE), seeks to promote the deployment, competitiveness and security of blockchain and distributed ledger technologies across critical sectors, including cybersecurity, supply chain resiliency, healthcare, e-commerce and decentralized identity management.
• A companion bill was introduced in the House (H.R. 1664) on February 27, 2025, by Reps. Kat Cammack (R-FL) and Darren Soto (D-FL).
• Key provisions include:
  • Principal Advisor Role. The secretary of commerce would serve as a principal adviser to the president on blockchain deployment, competitiveness and policy.
  • National Advisory Committee. The bill would establish a “National Blockchain Deployment Advisory Committee” not later than 180 days after the enactment of the act, composed of representatives of federal agencies, industry experts, cybersecurity specialists, technologists, rural stakeholders and others. The committee would terminate seven years after the date of enactment of the act.
  • Development of Best Practices. The Commerce Department would be tasked with facilitating a compendium of best practices and guidelines for supporting the interoperability of blockchain technology, reducing cybersecurity risks and quantifying the value and potential cost savings associated with adopting blockchain technology.
  • Annual Reports to Congress. The secretary of commerce would be required to submit a report not later than two years after the date of enactment of the act, and annually thereafter, detailing activities of the secretary during the preceding year, emerging risks and recommendations for legislation related to blockchain technology.

Rep. Zach Nunn Introduces the GUARD Act

• On April 21, Rep. Zach Nunn (R-IA) introduced the “Guarding Unprotected Aging Retirees from Deception Act,” or the “GUARD Act.” The bill is co-led by Reps. Josh Gottheimer (D-NJ) and Scott Fitzgerald (R-WI).
• This bill would allow state and local law enforcement to use blockchain tracing tools to investigate financial fraud and “pig butchering” scams. It would also permit federal law enforcement to assist state and local law enforcement with cybercrimes. The bill would also instruct the Treasury Department to provide a comprehensive study on the state of fraud and scams.
• Key Provisions of the GUARD Act:
  • Expanded Use of Federal Grant Funds. The bill would allow state and local law enforcement agencies to use eligible federal grants to investigate scams and financial fraud specifically targeting retirees. This includes hiring analysts, providing training on using blockchain intelligence tools and encouraging improved data collection reporting.
  • Financial Fraud and “Pig Butchering.” The bill focuses on the growing threat of sophisticated scams, including “pig butchering” schemes, that disproportionately target retirees and senior citizens. The term ‘‘pig butchering’’ is defined in the act as “a confidence and investment fraud in which the victim is gradually lured into making increasing monetary contributions, generally in the form of cryptocurrency, to a seemingly sound investment before the scammer disappears with the contributed monies.”
  • Reporting. Each law enforcement agency that makes use of the eligible federal grant funds shall, not later than one year after making use of such funds, issue a report to the federal agency that provided the funds. The report would include an explanation of the amount of funds used, statistics concerning elder financial fraud and an assessment of the ability of law enforcement agencies to deter elder financial fraud, pig butchering and general financial fraud. Not later than two years after the date of enactment of the act, various federal agencies would be required to submit a report to Congress on the state of scams in the U.S.

Rep. Nydia Velázquez Introduces Bill to Close Puerto Rico Crypto Tax Loophole

• On April 22, Rep. Nydia M. Velázquez (D-NY) introduced the “Fair Taxation of Digital Assets in Puerto Rico Act,” (H.R. 2982) legislation that would amend the Internal Revenue Code of 1986 to modify the application of the sourcing rules for digital asset income of Puerto Rican residents. Velázquez’s bill would eliminate an exemption for crypto-derived income.

Regulatory Updates

Federal Reserve Withdraws Crypto-Asset and Dollar Token Guidance for Banks

• On April 24, the Federal Reserve Board announced the withdrawal of prior supervisory guidance relating to banks’ crypto-asset and dollar token activities, significantly revising its approach to monitoring crypto-related activities. The move reflects a shift toward normalizing the supervision of crypto activities within the standard bank examination and oversight framework.
• Key Actions Taken:
  • Withdrawal of SR 22-6 / CA 22-6 (August 2022 Supervisory Letter). This letter required all Federal Reserve-supervised banking organizations, including state member banks, to notify the Federal Reserve before engaging in any crypto-asset-related activities. Banks were expected to demonstrate that such activities were legally permissible and conducted safely and soundly, with robust risk management systems in place.
  • Withdrawal of SR 23-8 / CA 23-5 (August 2023 Supervisory Letter). This letter had established a formal supervisory nonobjection process for state member banks seeking to engage in activities involving dollar tokens, meaning tokens denominated in U.S. dollars and issued using distributed ledger technology. Banks were required to obtain written supervisory nonobjection from the Federal Reserve before engaging in such activities.
  • Withdrawal from 2023 Joint Statements. The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) announced it was withdrawing from two joint statements issued with the Office of the Comptroller of the Currency in 2023. These statements addressed crypto-asset risks and supervisory expectations for banks engaged in crypto-related activities and exposures.
• New Supervisory Approach. Banks are no longer required to provide advance notice to the Federal Reserve before engaging in crypto-asset or dollar token activities. The Federal Reserve will now monitor banks’ crypto-related activities through the ordinary supervisory and examination process, consistent with how other banking activities are overseen.
• Public Response. After the guidance was published, some industry participants praised the Fed’s actions. Sen. Cynthia Lummis (R-WY) tweeted on X that the move was “noise and not real progress.” She vowed to hold the Fed accountable until the digital asset industry is treated fairly. For an institution to be able to use the Federal Reserve System’s payment methods and settle transactions, it needs to have a master account at a Federal Reserve Bank. However, the Fed's rules do not give crypto-focused banks access to master accounts. Lummis stated the following additional concerns in support of her position: (i) the Fed still uses reputational risk in bank supervision, unlike the OCC and FDIC; (ii) the policy statement indicating that bitcoin and digital assets are unsafe and unsound has not been withdrawn; and (iii) the Fed staff behind Operation Chokepoint 2.0 are the same people still working on crypto issues at the agency today.

SEC Crypto Task Force Roundtable on Custody

• On April 25, the SEC hosted their third roundtable, “Know Your Custodian: Key Considerations for Crypto Custody.” The roundtable consisted of two panels, one on broker-dealer custody under the Securities Exchange Act of 1934, and the other on custody under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
• SEC Opening Remarks. SEC Chair Atkins opened the roundtable by emphasizing the need to modernize the SEC’s custody framework to accommodate crypto assets and blockchain technology. Atkins questioned whether the existing custody rules are fit for purpose, whether the special purpose broker-dealer framework remains workable and if a new model is needed. Atkins reaffirmed his commitment to data-driven, principles-based reform and encouraged collaboration with market participants.
  • Following the roundtable, there were reports that Atkins stated the SEC has ample room to maneuver in regulating digital assets under the existing laws without the need for immediate congressional action, but noted that it is always beneficial to have congressional input. The SEC plans to continue advancing regulatory efforts in parallel with ongoing legislative developments.
  • Commissioner Mark Uyeda emphasized that many crypto assets are not securities and urged the SEC to clarify that registered investment advisers may use state-chartered trust companies as qualified custodians. Uyeda also suggested modifying or sunsetting the special-purpose broker-dealer framework to allow broker-dealers to custody both securities and nonsecurities.
  • Commissioner Hester Peirce warned that the SEC’s current custody rules risk creating a legal “lava pit” for crypto activities and stressed that custody rules should not force intermediated custody where self-custody would be safer or more appropriate. Peirce emphasized that self-custody empowers crypto holders and should not be inadvertently blocked.
  • Commissioner Caroline Crenshaw defended the current custody framework as the “gold standard” for investor protection and cautioned that creating a separate custody regime for crypto could weaken longstanding safeguards that have supported U.S. market stability​.
• Challenges Under Existing Custody Rules. Panelists noted that traditional Exchange Act custody models, centered on possession of physical stock certificates or custody through clearing agencies, do not translate neatly to digital assets. Crypto custody relies on control of private keys, which introduces challenges in proving exclusive control without duplication.
• Exchange Custody and Access to Liquidity. Panelists explained that some crypto trading platforms require customers to transfer their digital assets into a wallet controlled by the exchange to access trading services​. Using omnibus wallets, where customer assets are pooled, may warrant additional safeguards, including real-time proof-of-reserves attestations, independent audits and verifiable asset segregation.
• Property Rights and UCC Article 8. Several participants discussed whether digital assets held in custody should be classified as financial assets under UCC Article 8. Opting into Article 8 treatment could provide customers with a recognized property interest, ensuring their holdings are insulated from a custodian’s creditors in the event of insolvency.
• Custody Requirements for Advisers and Funds. Panelists explained that, unlike broker-dealers, investment advisers and investment companies are generally required to hold client assets through third-party qualified custodians, such as banks or broker-dealers. Panelists noted that the current custody rules do not fit well with the unique attributes of digital assets, which may rely on decentralized infrastructures rather than intermediaries​.

CFTC Requests Public Comment on 24/7 Derivatives Trading

• On April 21, the CFTC issued a request for public comment seeking input on the potential expansion of CFTC-regulated derivatives markets to a 24-hour-a-day, 7-day-a-week trading model. Comments will be accepted through May 21, 2025. The CFTC is evaluating how technological advancements and market demand could reshape market structures.
• The CFTC request reflects the influence of crypto markets, which operate continuously and have standards for market accessibility and responsiveness.
• The areas of inquiry include whether existing governance standards for exchanges are sufficient for continuous trading, how exchanges would ensure adequate human oversight, staffing and supervision of markets around the clock, and what risk management models, margin practices and clearing processes would be necessary under a nonstop trading model.

El Salvador’s Crypto Regulator Proposes Cross-Border Sandbox in Meeting With US SEC

• On April 22, representatives of El Salvador’s National Commission on Digital Assets (CNAD) met with the SEC Crypto Task Force to discuss potential regulatory collaboration and the creation of a cross-border digital asset sandbox.
• Cross-Border Sandbox Proposal. CNAD proposed establishing a regulatory sandbox for live pilot programs involving U.S. and Salvadoran participants. Under the proposed framework, a U.S.-licensed traditional finance broker would seek a digital asset license under CNAD’s regime. A CNAD-licensed tokenization company would facilitate two small-scale tokenization offerings, each capped at $10,000.