This year began with an Executive Order stating the Trump Administration’s policy to establish the U.S. as a global leader in the responsible growth and innovation of digital assets and related blockchain technologies. In July, President Trump signed into law the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins), 12 U.S.C. §§ 5901 et seq., which recognized a dual federal-state regulatory framework for payment stablecoin issuers, while also codifying related foundational definitions, such as “money” and “digital assets.” The digital asset ecosystem — and looming regulatory frameworks — are much larger than the issuance and remittance of fully reserved payment stablecoins. On July 31, 2025, the President’s Working Group on Digital Asset Markets released a 160-page report, titled “Strengthening American Leadership in Digital Financial Technology,” which begins: “The American story is one of innovation. From the railroads that linked sea to shining sea, to the internet that connected the entire world, American entrepreneurs have led the buildout of next-generation technologies in every generation since our founding. Crypto should be no different.” Federal Reserve Gov. Michelle Bowman, vice chair for supervision, gave a speech on Aug. 19, 2025, at the Wyoming Blockchain Symposium titled “Embracing Innovation,” referencing the “seismic” and transformative shift in society and the banking industry that is underway and the “reframing” of supervision and regulatory mindsets. Recognizing safety and soundness in the banking system will always be the paramount focus, she noted an equal need for the banking industry to innovate to serve its consumers, businesses and communities, and to foster economic growth. Despite past inertia in the adoption of blockchain technologies, Gov. Bowman stated, “Change is coming.” Her response to those in banking who express concern about new technologies being a threat to the banking sector was: “We must choose whether to embrace the change and help shape a framework that will be reliable and durable — or stand still and allow new technology to bypass the traditional banking system altogether.” From her perspective, “the choice is clear.” This article provides a high-level overview to inform the question of what “crypto” is, followed by a brief summary of the pending legislation and rulemakings that will continue to add clarity to the ability of banks to engage with the digital asset ecosystem. Lastly, a review of the existing regulatory guidance reveals which EMBRACING INNOVATION Banking Digital Assets Beyond GENIUS activities are currently considered “legally permissible” and within the “business of banking,” culminating in considerations that banks can explore when formulating a long-term strategy as the digital asset ecosystem and the law of permissibility continue to evolve. What Is Crypto? The word “crypto,” as used today, has undergone an interesting evolution, one that is understood by few and not clearly defined, despite its mainstream adoption. The Digital Assets Working Group Report defines the term “crypto” for purposes of the report as an entire “ecosystem and technologies built around digital assets and blockchains, including the users, developers, businesses and enthusiasts engaged in these domains.” Notably, the word crypto is not referenced or used within the body of Satoshi Nakamoto’s 2008 white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” which was the impetus for the subsequent launch of the bitcoin distributed public ledger. Rather, in the words of the now infamous creator of bitcoin — fueled in 2008 by the global financial crisis — “what is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a third party.” This spurred modern-day interest in the application of blockchain technologies to launch payment systems and “cryptocurrencies” beyond the original bitcoin protocol. Before cryptocurrency became mainstream, there was cryptology, a long-studied field that included cryptography as a means of creating code for secure communication, including by the U.S. government. According to the U.S. Department of Commerce, “public-key cryptography was invented in 1976.” According to the National Institute of Standards and Technology (NIST), in “today’s connected digital world, cryptographic algorithms are implemented in every device and applied to every link to protect information in transmission and in storage.” Crypto has rapidly evolved in scope and application from shorthand for the “cryptographic proof” used to validate blockchain transactions, to shorthand for the countless varieties of “cryptocurrencies” launched since 2009, to now BY KIRSTIN D. KANSKI AND ALEX R. SCHOEPHOERSTER, SPENCER FANE LLP 17
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