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The White House’s long-awaited digital asset report contains a vast smorgasbord of policy proposals, but it played its Strategic Bitcoin Reserve cards extremely close to its chest.
- White House report offers no reserve/stockpile specifics
- Other recommendations largely tread covered ground
- Roman Storm’s fate in jury’s hands; Samourai devs plead guilty
- Coinbase wearing out its welcome on Capitol Hill
- Winklevii behind delays in Quintenz’s CFTC confirmation?
- Kraken raising $500 billion as Q2 revenue jumps
On July 30, the White House released a 166-page report prepared by the President’s Working Group on Digital Assets. The report followed a January executive order by President Trump to propose “a Federal regulatory framework governing the issuance and operation of digital assets, including stablecoins.”
The stablecoin issue has largely been resolved after Trump signed the GENIUS Act into law earlier this month. However, Trump also asked the Working Group to put some flesh on the bones of his order to establish both a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile. And yet the report makes scant mention of either of these crypto treasuries, and there’s no mention of them whatsoever in the accompanying fact sheet issued by the White House.
The reserve/stockpile was to comprise, respectively, BTC and other tokens already in the government’s possession following seizures/forfeitures. Additional BTC were to be added to the reserve if it could be done in a ‘budget neutral’ way. Based on pre-release comments by Working Group chair David Sacks and deputy Bo Hines, observers expected the report to include budget-neutral addition proposals. Nope.
The report states that administration of the reserve/stockpile will be overseen by the Treasury Department and that the two vessels will “be capitalized by forfeited digital assets.” However, as recent public debates have demonstrated, some of the assets currently in the government’s possession belong to the victims of crime, so they’re not the government’s to keep.
Also, while “the bitcoin in the Reserve will generally not be sold,” some of the digital assets in the government’s possession will be used “to support law enforcement operations, to be equitably shared with state and local law enforcement partners, and to fulfill other statutory forfeiture program requirements.”
As for the budget-neutral acquisition of more BTC, the report simply repeats previously issued language regarding the Treasury and Commerce departments being tasked with figuring out ways of stacking more sats without costing taxpayers a dime. But if Treasury/Commerce has any ideas on this score, they aren’t talking about them.
Hines spoke to Fox Business following the report’s release, but wasn’t pressed on the reserve/stockpile issue and didn’t volunteer any specifics.
Hines wasn’t much more forthcoming in a conversation with the Crypto in America podcast, claiming that much work remained to “build the infrastructure” of the reserve/stockpile. Other than that, Hines simply repeated previous statements to the effect that “we do believe in accumulation, obviously in budget-neutral ways.”
Asked directly “how much Bitcoin does the government have,” Hines declined to even give a “ballpark” figure. Hines cited “several reasons” why the government wasn’t disclosing this data, while allowing “there might be a time that we do.”
Other recommendations
As for the lengthy report’s other recommendations, a full table starts on page 141, but here are some broad strokes.
The digital asset market structure bills currently before Congress aim to carve out clear lanes for the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The report says the SEC and CFTC should “use their existing authorities to immediately enable the trading of digital assets at the federal level,” but the CFTC should be given “clear authority to regulate spot markets in non-security digital assets.”
Many of the report’s SEC recommendations—allowing unregistered token sales by projects not yet deemed ‘mature’; an ‘innovation exemption’; safe harbor for certain types of airdrops, etc.—mirror elements in the House of Representatives’ market structure bill (CLARITY Act), which was approved earlier this month.
The CFTC is urged to consider amending its rules “to enable the use of blockchain-based derivatives” and to give guidance to prediction markets like Kalshi and Polymarket “regarding the listing of leveraged, margined, or financed spot retail commodity transactions on digital assets.’
The SEC and CFTC are both urged to consider “more vertically integrated business models” by allowing registrants to “offer multiple services within a single user interface.” For example, “combining exchange services with custody of trading assets allows for real-time settlement.”
While federal banking regulators have largely backed off the restrictive policies that so annoyed the crypto sector under the Biden administration, the report says regulators should “never again” pursue policies that result in the alleged ‘debanking’ of crypto operators during Operation Choke Point 2.0. Instead, regulators are urged to “embrace the opportunities digital assets and blockchain technologies offer to banks nationwide.”
Similarly, federal banking regulators “should provide clarity and transparency” regarding the process of obtaining a national bank charter and/or a Federal Reserve Bank master account.
As for stablecoins, while the GENIUS Act is now law of the land, the report says “all agencies to which Congress delegated responsibilities under the GENIUS Act should faithfully and expeditiously execute those responsibilities.” Agencies should also “promote U.S. private sector leadership in the responsible development of cross-border payments and financial markets technologies.”
Interestingly, the report notes that the benefits of stablecoin issuers holding a U.S. permit are “modest,” suggesting claims of a supposed rush by foreign issuers to ‘onshore’ themselves may be overblown.
As for central bank digital currencies (CBDCs), it should come as no surprise that the report suggests that they should be cast into the fiery pits of hell, and any country that issues a CBDC should be hit with 9,000,000% tariffs.
In terms of combatting illicit finance, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is urged to evaluate how its digital asset guidance should be “rescinded, modified or updated to reflect legislative and regulatory changes.”
Congress is urged to “consider creating a bespoke digital asset-specific financial institution types or sub-types, which could enable Treasury to more carefully tailor [anti-money laundering/countering the financing of terrorism] obligations to different participants in the digital asset industry.”
Under a header reading ‘Enabling Private Sector Investigations,’ the report suggests Congress enact “a digital asset-specific ‘hold law’ that offers a safe harbor to institutions that temporarily and voluntarily hold property involved in suspected illegal activity during a short duration investigation.” Examples of these institutions include exchanges and stablecoin issuers.
And while it often appears that the Trump administration has no interest in pursuing crypto crooks, the report wants Congress to apply the Bank Secrecy Act’s weight against “foreign-located actors” should they engage in conduct that negatively impacts the U.S.
Finally, on taxation, Congress is urged to create “a new class of assets subject to modified versions of tax rules applicable to securities or commodities.” Taxpayers could also be required to report “foreign digital asset accounts” to eliminate taxpayers’ ability to “conceal assets and taxable income by using offshore digital asset exchanges and wallet providers.”
Congress is also urged to include digital assets in the rules regarding wash sales. Sen. Cynthia Lummis (R-WY) recently introduced a bill that would do just that, seeking to close the loophole that allows crypto traders to deduct income losses from wash trading tokens.
Coin mixers in the legal crosshairs
The report wants Congress to “codify principles regarding how control over an asset impacts Bank Secrecy Act (BSA) obligations, particularly for money transmitters. A software provider that does not maintain total independent control over value should not be considered as engaged in money transmission for purposes of the BSA.”
This language addresses decentralized finance (DeFi) platforms, including coin mixing services like Tornado Cash. Speaking of, the trial of Tornado Cash co-founder Roman Storm is now in the hands of a jury, after both the prosecution and defense made their closing arguments on July 30 following two weeks of testimony.
In August 2023, the Department of Justice (DOJ) charged Storm with conspiracy to commit money laundering, operating an illegal money transmitting business, and facilitating sanctions violations, leaving him facing up to 45 years in prison if convicted on all counts. Storm chose not to take the stand in his own defense, although he made a public appeal for another $1.5 million in donations to help cover his legal fees as the trial headed into its final week.
Storm’s defense centered mainly on the hands-off nature of Tornado Cash’s developers, something the White House now appears intent on addressing. A similar defense was being prepared in the case of Keonne Rodriguez and William Lonergan Hill, co-founders of rival mixer Samourai Wallet, until they reached a last-minute deal with federal prosecutors this week.
In April 2024, Rodriguez and Hill were arrested and charged with conspiracy to commit money laundering and conspiracy to operate an unlicensed money-transmitting business. Facing up to 25 years in prison, Rodriguez and Hill agreed this week to plead guilty to the money transmitting charge, in exchange for which the money laundering charge will be dropped. U.S. District Judge Denise Cote accepted the pleas.
The defendants will be sentenced on November 7, and the pair has reportedly agreed not to appeal any prison sentence under five years. The pair has also agreed to forfeit $237 million (although only $6.4 million is to be paid pre-sentencing) and pay a fine of $400,000.
Unlike Storm, who tended to play down Tornado Cash’s role in laundering the proceeds of crime, the Samourai bros openly celebrated their roles, even publicly taunting European Union (EU) law enforcement agency Europol and promoting their service’s ability to help Russian oligarchs evade economic sanctions.
On Wednesday, Hill told Judge Cote that he “understood that the proceeds of hacks of various sites could be sent through the code base of Samourai Wallet to obscure their origin.”
Coinbase, a16z, not making friends on Capitol Hill
The Hill’s coverage of the report featured a quote from a White House official that “the [crypto] industry will be extremely pleased with us.”
That apparently isn’t always the case, as a new Wired report claims the industry fought the White House over how it wanted Congress to proceed in passing digital asset legislation… and the White House won.
In June, the House and Senate were at loggerheads over how to proceed with the crypto bills in their respective chambers. House leadership wanted to combine stablecoin and market structure bills into a single piece of legislation, while the Senate wanted to get a stablecoin bill onto Trump’s desk ASAP and do market structure later. Trump supported the latter strategy.
Wired’s sources claim the Coinbase (NASDAQ: COIN) digital asset exchange and the Andreessen Horowitz (a16z) (NASDAQ: ZADIHX) venture capital group had pressed Republicans to combine the House’s market structure bill (CLARITY) with the Senate’s stablecoin bill (GENIUS).
Coinbase and a16z are among the largest contributors to the Fairshake political action committee that spent $135 million in the 2024 election cycle. Fairshake recently let it be known that it has amassed a $140 million war chest to spend ahead of the 2026 midterm elections and that it was watching closely how pols voted on the crypto bills.
Apparently convinced that they now ran the government when it came to crypto matters, a ‘senior administration official’ told Wired that the two companies “were being hissy pissy about the way to do things” and “we said ‘you’re just fuckin’ wrong.’”
Coinbase was singled out by a different Republican operative as making enemies within the House GOP caucus by trying to “throw [their] weight around.” This source claimed, “at the end of the day [Coinbase] wasted two weeks of the legislative calendar by slowing everything down.”
Coinbase’s efforts to make nice with crypto-friendly Democrats in addition to Republicans also didn’t sit well within GOP circles. The senior official added that crypto operators “need to understand that if they stick with us they have a good chance of success—rowing against us will almost guarantee failure […] if [Democrats] take power again, you’re not getting shit.”
Did Winklevii stab CFTC nominee Quintenz in the back?
Speaking of crypto operators behaving badly, Politico reported Wednesday that Cameron and Tyler Winklevoss, co-founders of the Gemini exchange, were behind the White House’s as-yet-unexplained decision to ask the Senate Agriculture Committee to cancel a confirmation hearing for Brian Quintenz, Trump’s nominee for CFTC chairman.
Given that this was the second cancellation in as many weeks, speculation had it that Quintenz’s seat on the board of the CFTC-registered Kalshi might have raised some conflict of interest concerns. But Politico reported that the Winklevii had other reasons for calling Trump over the weekend to advise against keeping Quintenz as the nominee.
Despite both Cameron and Tyler praising Trump’s nomination of Quintenz when it was announced in February, the brothers reportedly told Trump that Quintenz was the wrong choice because he wouldn’t ‘shake up the CFTC enough.’
A second source claimed the Winklevii told Trump that Quintenz was ‘not aligned with Trump’s agenda.’ To support this assertion, the brothers reportedly pointed to Quintenz’s testimony at an Ag Committee hearing in June in which he said he supported increasing the CFTC’s budget (which is heresy in the DOGE cost-cutting era).
Quintenz’s budget comments reflect the fact that the CFTC is now expected to handle the bulk of digital asset oversight, despite its annual budget being less than one-fifth of the SEC’s. The fact that the Winklevii found this to be a dealbreaker suggests the brothers might have other concerns they chose not to tell Trump about.
A White House spokesperson told Politico that Quintenz “remains President Trump’s nominee” and the administration was looking forward to his “swift confirmation.” Neither the Winklevii nor Quintenz have yet to address the report.
Kraken raising cash
The Kraken digital asset exchange is second only to Coinbase among U.S. exchanges in trading volume, but Kraken has yet to follow Coinbase’s lead by going public. That could change early next year, but there’s apparently never a bad time to raise additional cash while pimping your surging revenue.
On July 29, The Information reported that Kraken was looking to raise $500 million at a valuation of $15 billion. That valuation is a significant increase on the $10 billion sticker price the exchange gave itself in 2021 (and 2018’s $4 billion valuation).
Separately, Kraken co-CEO Arjun Sethi told Bloomberg that the exchange generated $412 million in ‘gross revenue’ in the three months ending June 30, an 18% improvement from the same period last year. Adjusted earnings (what Charlie Munger used to call ‘bullshit earnings’) totaled $79.7 million, down 7% year-on-year and less than half of Q1’s $187.4 million.
Kraken blamed the earnings decline on rising expenses from new product launches—like the new Krak app and tokenized equities outside America—and geographical expansion in markets including the EU and Brazil.
Sethi said Kraken’s Q2 trading volume hit nearly $187 billion, nearly one-fifth better than the same period last year. The number of funded accounts jumped 37% to 4.4 million, while total assets on the platform surged 46.4% to $43.2 billion (partly due to significant gains in the fiat value of digital assets, something beyond Kraken’s control).
Sethi took a dig at Kraken’s rivals by saying the figures showed Kraken was “gaining share across the board.” But when asked for updates on the timing of Kraken’s IPO, Sethi demurred, saying only that “when we think it’s the right time for us to go, we’ll go.”
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