This week decoded
While Congress is back home campaigning, the Trump Administration has been flexing its regulatory authorities by clearing away old rules and making way for new ones. In the wake of failed action on market structure legislation in Congress, the CFTC has started work on a new regulatory framework for digital asset transactions and markets. It published an Advance Notice of Proposed Rulemaking seeking public input on a series of issues which will inform its rulemaking.
Meanwhile, FinCEN withdrew two controversial proposals, the Unhosted Wallet Rule, left over from President Trump’s first term, and the Crypto Mixer Rule. Both rules have hung over the crypto industry’s self-custody and privacy communities for years.
The IRS cleared a path for staking inside trust-based products like ETPs with a new safe harbor allowing investment trusts and grantor trusts to stake without losing their tax status.
Read more below
Congress
Hearings
Congress returns in November after the midterm elections.
Correspondence
Senate Permanent Subcommittee on Investigations (PSI) Ranking Member Richard Blumenthal (D-CT) sent a letter to Chairman Brandon Lutnick requesting information about Cantor Fitzgerald’s relationship with Tether. (Letter)
Trump Administration
Treasury Department
The Financial Crimes Enforcement Network (FinCEN) formally withdrew its 2020 proposed rule (Unhosted Wallet Rule) requiring banks and money services businesses to keep records for certain transactions involving self-hosted wallets above $3,000 and report transactions above $10,000. The proposal also required financial institutions to collect and verify information about customers and counterparties involved in certain transactions with private wallets. (Federal Register)
FinCEN also withdrew a 2023 proposed rule (Crypto Mixer Rule) under the USA PATRIOT Act that would classify convertible virtual currency mixing services as a primary money laundering concern. (Federal Register)
The Internal Revenue Service (IRS) issued Revenue Procedure 2026-20 to provide a safe harbor for investment trusts and grantor trusts that engage in staking. (Rev. Proc.)
Treasury published a notice on extending, without change, its “Information‑Sharing Initiative: Digital Assets Criteria Form” collection form. Comments are due by December 8. (Federal Register)
Commodity Futures Trading Commission (CFTC)
The CFTC released an Advanced Notice of Proposed Rulemaking regarding its “intent to establish a comprehensive regulatory framework comprised of fit-for-purpose rules concerning section 2(c)(2)(D) of the Commodity Exchange Act and retail commodity transactions involving crypto assets.” The ANPRM “solicits comment on the manners in which the Commission can: (i) prevent abusive practices in crypto asset markets and CTXs under a uniform national regime; (ii) provide market participants with crypto asset-specific contextual information concerning certain requirements and practices that are commonly accepted in the industry and have been found, based on the Commission’s experience in overseeing aspects of crypto asset markets since 2014, to represent industry best practices for compliance with the regulatory requirements that attach to CTXs; and (iii) codify through rulemaking a subcategory of designated contract market registration, known as a crypto asset market, that is purpose-built specifically for CTXs.” The comment period ends 60 days from publication in the Federal Register. (Press release)
In a response to a letter from Sen. Elizabeth Warren (D-MA), Government Accountability Office acting managing director for congressional relations Dave Powner reportedly indicated the GAO will investigate the CFTC’s performance under the Trump Administration. (Punchbowl)
Noteworthy Quotes
ADMINISTRATION
Commodity Futures Trading Commission (CFTC)
CFTC Chair Mike Selig published an op-ed in the Wall Street Journal entitled “CFTC’s New Rules for Crypto.” He says, “The CFTC is moving quickly to institute rules and regulations that account for the distinctions between crypto assets and other types of commodities. Today’s action is only the beginning. The CFTC is starting the process of addressing gaps in crypto-asset market structure and creating clear rules of the road for innovators and market participants. We haven’t solved every problem, nor can agency action substitute indefinitely for a statutory framework passed by Congress, but we must do what we can.” (Op-ed)
Selig posted “The CFTC’s proposed crypto asset regulatory regime would institute a federal regulatory framework designed to protect exchange customers from fraud, manipulation, and theft of customer funds as we saw with FTX. Ironically, by denouncing our efforts to bring market-based regulation to crypto exchanges and supporting the status quo, our critics find themselves on the side of the fraudsters, manipulators, and looters-dangerously inviting the next Sam Bankman-Fried to run roughshod over the American people.”
Selig also posted “We can’t afford to wait for legislation any longer. The CFTC has the authority to put a regulatory framework in place for crypto markets, and we’re using it.”
Selig also posted “Not your keys, not your coins. The right to self-custody is a hallmark of Bitcoin and blockchain technology and a principle that I believe in 100%. The CFTC is committed to protecting the rights of blockchain users and software developers, while also protecting customers’ assets when they choose to rely upon a trusted party to custody or exchange their assets.”
Selig also posted “The CFTC’s regulatory framework for crypto asset exchanges is modeled after the two-tiered bank charter regime to allow exchanges to opt in to comprehensive federal regulation and engage in a broader range of permissible market activities–or remain licensed under the patchwork of state money transmitter laws and continue to provide the payments services authorized under these licenses.”
Selig also posted “America is no longer sitting back while crypto moves overseas, and other countries set the standard. Crypto is back onshore, and regulatory clarity will keep it here with America leading the way.”
Selig also posted “There will be no race to the bottom on leverage. The CFTC will apply the same proven margin models and controls to crypto that have long supported the integrity of our derivatives markets.”
Selig also posted “When considering the CFTC’s regulatory regime with respect to crypto assets, it may be helpful to envision the rungs of a ladder. More below on this commonsense analogy and how the agency plans to provide clear rules of the road for crypto”
Selig also posted “The collapse of FTX showed what happens when markets operate without the right protections. Our federally regulated crypto futures markets held because customer funds were separated and protected. We’re bringing those same safeguards to crypto spot markets.”
Selig also posted “You cannot regulate an exchange like a casino and expect the same protections as a federally regulated market. Prediction markets should be subject to the same standards we expect across American financial markets.”
Selig also posted “I’m disappointed that Congress failed to get market structure legislation to POTUS’ desk. But the CFTC has statutory authority and we’re going to use it to protect Americans and provide a federally regulated path for crypto.”
Selig also posted “Today, the CFTC is doing its part to deliver clear rules of the road for crypto asset markets with its advanced notice of proposed rulemaking on Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets.”
Selig also posted “The lesson from FTX’s failure should have been obvious. America shouldn’t have to choose between responsible innovation in crypto and protecting market participants from fraud and abuse. It needs prophylactic rules that reasonably ensure both. Today, the CFTC is taking action to make that possible.”
CFTC posted “CFTC Seeks Public Comment on Advanced Notice of Proposed Rulemaking Relating to Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets.”
CONGRESS
Prediction Markets
Rep. James Comer (R-KY) posted “FoxNews: Comer weighs in on prediction market crackdown amid insider trading concerns. ‘Government employees and politicians are placing bets online and taking profits. We have to ensure this doesn’t happen.”
Rep. Steven Horsford (D-NV) posted “Prediction markets are now taking wagers on whether the September jobs report will beat economists’ expectations. Meanwhile, the latest federal data shows job openings fell to 7.08 million in August, even as layoffs remained low. Behind these economic predictions are real workers and families whose financial security depends on access to good-paying jobs. As prediction markets expand into everything from sports to economic indicators, questions about transparency, consumer protections, and appropriate oversight deserve serious attention.”
Horsford also posted “Betting is now just a tap away, making it easier than ever to wager without considering the financial consequences. As online betting and prediction markets expand, consumer protections must keep pace. Sports bets shouldn’t escape responsible gaming oversight simply because they’re marketed as financial products. Nevada understands that a strong gaming industry requires accountability for gambling addictions and respect for state and Tribal gaming laws.”
Rep. Joe Neguse (D-CO) posted “Reminder — the U.S. Senate, on a bipartisan basis, banned Senators from participating in prediction markets. Our colleagues in the House have refused to do the same.”
Miscellaneous
Senator Bill Hagerty (R-TN) posted “ChairmanSelig is establishing clear rules to cement U.S. leadership in digital assets. This is how America leads the future of crypto technology: regulatory certainty that promotes innovation and protects consumers.”
Sen. Cynthia Lummis (R-WY) posted “Democrats demanded that Chief Compliance Officers be barred from holding conflicting roles at affiliated crypto entities. We wrote it into the Clarity Act. Democrats said, ‘no thanks.’”
About Zero One Strategies
Zero One Strategies is a specialized government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.
The practice focuses on key areas such as artificial intelligence, digital assets, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.
Contact us at Stacey@ZeroOneStrategies.com
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