August 7, 2025
5 min read
OBSERVER RESEARCH FOUNDATION
Trump’s administration redefined US crypto policy, advancing regulation and creating a strategic Bitcoin reserve to bolster financial leadership.
United States’ Strategic Crypto Vision: From Regulation to Bitcoin Reserve
Cryptocurrency has moved to the centre of US economic strategy, with the Trump administration embracing regulation and reserve-building to assert financial leadership in a changing global order.The Trump administration’s approach to cryptocurrency has evolved significantly between its first and second terms, reflecting a broader shift in the role of digital assets within American economic and geopolitical strategy. What was once a peripheral issue has increasingly become central to policy discourse in Washington. Cryptocurrency now appears to be positioned not only as a financial innovation but also as a potential instrument for reinforcing the global role of the US dollar. These developments suggest a growing entwinement of crypto policy with broader macroeconomic objectives. While certain regulatory and institutional measures have been initiated, several critical questions remain unresolved. Importantly, the trajectory of US crypto policy under President Donald Trump cannot be examined in isolation. Rather, it must be understood within the wider context of the administration’s evolving economic priorities, strategic motivations, and vision for restoring American financial leadership in a changing global order.
As the United States moves to integrate crypto more deliberately into its economic architecture, other countries are racing to define their own strategic postures.
Legislative Advances: FIT21
Among the most notable legislative efforts under the Trump administration’s renewed crypto agenda is the introduction of a robust regulatory bill designed to bring clarity to the digital asset ecosystem. The Financial Innovation and Technology for the 21st Century Act (FIT21) represents a landmark legislative initiative aimed at establishing a comprehensive regulatory framework for digital assets in the United States. At its core, the bill seeks to delineate the respective roles and responsibilities of federal regulatory bodies, primarily the US Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), in overseeing the rapidly evolving cryptocurrency sector. As a result, FIT21 is increasingly positioned to serve as the foundational framework for digital asset regulation in the United States. Its emphasis on regulatory clarity, market integrity, and innovation signals a shift in Washington's attitude toward crypto from scepticism to structured engagement.Institutional Shift
The evolving relationship between traditional banking and the cryptocurrency sector has entered a new phase, driven by regulatory shifts and growing institutional interest. A major catalyst was the repeal of Staff Accounting Bulletin (SAB) 121 in January 2025. Previously, this SEC rule required banks to treat customer-held crypto assets as liabilities on their balance sheets, thereby discouraging banks from offering custodial services due to the regulatory and capital burdens it imposed. With its repeal, banks now have a clearer pathway to enter the crypto custody space without disproportionately affecting their financial reporting. This regulatory shift was accompanied by a significant leadership transition at the SEC, wherein former Chair Gary Gensler was succeeded by Paul S. Atkins, a proponent of more permissive regulatory approaches. Under Atkins’s leadership, the SEC is anticipated to re-evaluate the applicability of the Howey Test, the longstanding legal framework used to determine whether a financial instrument qualifies as a security under US law. A potential narrowing of this definition would reduce the number of crypto assets falling within the SEC’s regulatory purview, thereby facilitating greater latitude for banks and financial technology firms to develop and offer a broader array of cryptocurrency-related products and services. Major financial institutions have begun to signal a strategic shift toward the integration of digital assets within their service portfolios. Citigroup has announced its potential entry into the crypto custody space, while JPMorgan has also permitted cryptocurrency purchases. These developments underscore a measured yet increasing institutional confidence in the viability and strategic relevance of digital assets within the conventional banking sector. No longer situated at the periphery of financial innovation, cryptocurrencies are progressively reshaping core banking functions, including asset custody, payment systems, and regulatory compliance frameworks. As regulatory clarity continues to advance, traditional banking entities are well-positioned to assume a central role in the next phase of the evolving crypto-financial ecosystem.The Bitcoin Reserve
The United States has emerged as the most prominent sovereign holder of Bitcoin, largely through the accumulation of assets seized in high-profile criminal investigations, including operations targeting the Silk Road marketplace, dark web illicit trade, and ransomware networks. As of early 2025, the US government holds approximately 200,000 BTC. However, recent policy developments indicate a shift in the federal government's approach from passive custodianship to strategic asset management.The United States has emerged as the most prominent sovereign holder of Bitcoin, largely through the accumulation of assets seized in high-profile criminal investigations, including operations targeting the Silk Road marketplace, dark web illicit trade, and ransomware networks.In March 2025, President Donald Trump signed an executive order establishing a Strategic Bitcoin Reserve, thereby centralizing all confiscated Bitcoin holdings under a unified federal framework. This marked a departure from previous practices under which seized digital assets were routinely liquidated through public auctions and reflects an evolving geopolitical calculus. Rather than viewing Bitcoin solely as a forfeited financial instrument, the new policy frames it as a strategic digital asset with implications for monetary sovereignty, economic security, and foreign policy. This repositioning suggests that state actors are beginning to incorporate digital assets into broader macroeconomic and geopolitical strategies, signalling the emergence of Bitcoin as a non-traditional reserve asset in a multipolar financial order.
Global Crypto Race
As the United States moves to integrate crypto more deliberately into its economic architecture, other countries are racing to define their own strategic postures. El Salvador and the Central African Republic have already adopted Bitcoin as legal tender, albeit with mixed success. Meanwhile, China continues to expand its central bank digital currency, the e-CNY, which now facilitates cross-border transactions in pilot programs involving multiple countries. Russia and Iran have turned to crypto to bypass sanctions, exploring stablecoins and Bitcoin-based settlements for international trade. The European Union is pursuing a Digital Euro with a cautious but firm regulatory orientation. The Middle East is witnessing increased activity, too, with the UAE positioning itself as a crypto-friendly hub, attracting talent and capital. The emergence of Bitcoin and other digital assets as instruments of state strategy is reshaping the financial architecture of the global order. Whether through adoption, regulation, or competition, nations are no longer viewing crypto merely as speculative technology but as a pillar of future economic influence. For the US, the challenge is twofold: to lead in innovation while safeguarding systemic stability. The US’s evolving crypto vision from deregulation to reserve strategy may offer one blueprint, but it is by no means the only path forward. The global crypto race is underway, and its winners will likely shape the contours of 21st-century power.Sauradeep Bag is an Associate Fellow at the Observer Research Foundation.
Source: Originally published at Observer Research Foundation on August 7, 2025.