This week decoded
Driving the week in crypto federal policy, the SEC proposed a rule aimed at expanding retail access to crypto investment. Meanwhile, Treasury and the Federal Reserve issued a new round of rules implementing the GENIUS Act ahead of its January 2027 effective date. In addition, the IRS clarified that digital assets don’t qualify for a new tax credit for contributions to scholarship programs for elementary and secondary students.
The Independent Community Bankers of America (ICBA) sued the OCC over national trust bank charters for crypto firms.
On the Hill, Sen. Steve Daines (R-MT) introduced his long-awaited crypto tax bill. On the House side, Rep. Sean Casten (D-IL) is reportedly quietly asking Democrats to back a potential challenge to Ranking Member Maxine Waters (D-CA) for the top Democratic seat on the House Financial Services Committee. Floor action on digital assets has stalled, but crypto oversight is picking up, and that trend is likely to grow in the next Congress.
Read more below
Congress
Hearings
Congress returns after the midterm elections.
Legislation
Sen. Steve Daines (R-MT) introduced the Aligning Digital Assets with Principles of Taxation (ADAPT) Act to create a new tax exemption for the use of stablecoins in small purchases of goods and services, impose wash sale rules, and other updates to the tax code regarding digital assets. Senate Banking Committee Chair Tim Scott (R-SC) and Sens. Cynthia Lummis (R-WY) and Bernie Moreno (R-OH) cosponsored. (Text)
Sen. Richard Blumenthal (D-CT) introduced the Anti-Corruption Tax Act to impose a 100% surtax on income attributable to favorable federal actions received by covered public officials and their family members. A covered favorable government action includes “the issuance of a Federal bank charter, trust charter, special purpose charter, license, registration, approval, or other discretionary Federal authorization permitting an entity to engage in banking, payments, digital asset activities, or other regulated financial activities.” (Press release)
Correspondence
Senate Banking, Housing, and Urban Affairs Committee Ranking Member Elizabeth Warren (D-MA) and of the Senate Health, Education, Labor, and Pensions Committee Ranking Member Bernie Sanders (D-VT) sent a letter to Acting Secretary of Labor Keith Sonderling and Assistant Secretary of Labor Daniel Aronowitz requesting information regarding recent reporting that over ten thousand fake comments were submitted purportedly supporting the Department of Labor’s proposed rule to open up defined-contribution plans to investments in alternative assets, including private equity and cryptocurrencies. (Letter)
Senate Permanent Subcommittee on Investigations (PSI) Ranking Member Richard Blumenthal (D-CT) sent a letter to Treasury Secretary Scott Bessent and Attorney General Todd Blanche calling for investigations into Tether’s anti-money laundering and sanctions compliance practices. (Press release)
House Oversight Committee Chair James Comer (R-KY) sent letters to prediction market companies Hyperliquid Labs, Crypto.com, and Aristotle Exchange (PredictIt) requesting information about how they identify customers’ identities and what they are doing to prevent insider trading. (Press release)
Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Sens. Ben Ray Luján (D-NM), Catherine Cortez Masto (D-NV), Alex Padilla (D-CA), Peter Welch (D-VT), Martin Heinrich (D-NM), Chris Van Hollen (D-MD), Jacky Rosen (D-NV.), Patty Murray (D-WA), Cory Booker (D-NJ), and Elizabeth Warren (D-MA) sent a letter to Frank Bisignano, Chief Executive Officer of the Internal Revenue Service (IRS), requesting the IRS eliminate a newly proposed citizenship and work authorization checkbox from the final version of the 2026 Form 1040. In the letter, they also call for updated tax gap data, saying, “The IRS released its last tax gap report in October 2024, which projected the tax gap for tax year 2022 was nearly $700 billion per year, even though it omitted perhaps the largest parts of the tax gap attributable to corporate income tax, income from flowthrough entities, foreign activities, and digital assets.” (Letter)
Publications and Events
Senate Permanent Subcommittee on Investigations (PSI) Ranking Member Richard Blumenthal (D-CT) released report how Tether’s dollar-pegged stablecoin (USDT) is used within Iran’s shadow banking network. (Report)
The Congressional Research Service (CRS) published a report on Crypto and Bank-Permissible Activities. (Report)
Trump Administration
Securities and Exchange Commission (SEC)
The SEC proposed new rules to provide a tailored framework for the custody of crypto assets for registered investment advisers and regulated funds. The proposal removes regulatory barriers that inhibit the adviser’s ability to provide crypto-related investment advice and allows regulated funds to offer clients access to a wider range of crypto asset-related investment strategies. (Press release)(Rule)
Federal Reserve
The Fed issued a proposed rule on the Application Procedures for Board-Supervised Insured Depository Institutions Seeking Approval for a Subsidiary to Issue Payment Stablecoins to establish procedures for an insured State member bank seeking to obtain Board approval for a subsidiary to issue payment stablecoins under the GENIUS Act. The comment period ends November 30. (Federal Register)
Treasury Department
Treasury published an interim final rule on Forms and Procedures for Review of State Certifications by the Stablecoin Certification Review Committee to implement the GENIUS Act. Section 4(c)(4) of the GENIUS Act requires a process to facilitate the Committee’s approval or denial of certifications submitted by State payment stablecoin regulators and prescribe the form of the certifications. The interim final rule ensures that interim forms and procedural regulations are in place by the effective date of the GENIUS Act. The comment period ends on November 30. (Federal Register)
Treasury and the IRS issued proposed regulations on a new nonrefundable federal tax credit for qualified contributions to scholarship-granting organizations that fund qualified elementary and secondary education scholarships. The definition of “cash” for the purposes of qualified contributions is a “physical currency, check, money order, electronic transfer (including, for example, by credit or debit card), after-tax payroll deduction, or other similar method, in each case all in U.S. dollars, but does not include any digital assets.” (Federal Register)
Office of the Comptroller of the Currency (OCC)
The Independent Community Bankers of America (ICBA) filed a lawsuit alleging the OCC exceeded its authority in granting trust charters to crypto companies. (Complaint)
Noteworthy Quotes
ADMINISTRATION
Securities and Exchange Commission (SEC)
Securities and Exchange Commission posted “TODAY: The Commission proposed new rules and amendments to provide a tailored framework for the custody of crypto assets for registered investment advisers and regulated funds, i.e. registered investment companies and business development companies.”
Securities and Exchange Commission posted “The Commission’s proposal would modernize custody rules and expand investor choice by removing regulatory barriers that inhibit the adviser’s ability to provide crypto-related investment advice”
SEC Chair Paul Atkins said in a statement on the SEC’s proposal on how investment advisers and funds can custody crypto assets, “Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace. To that end, today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before—and replacing the grey of uncertainty created by custody rules crafted for a bygone era.” (Press release)
Atkins posted “Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace. To that end, today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before—and replacing the grey of uncertainty created by custody rules crafted for a bygone era.”
Commodity Futures Trading Commission (CFTC)
CFTC Chair Mike Selig posted “Hester Peirce stood up for the innovators, builders, and entrepreneurs of the crypto community during years of debanking, regulation by enforcement, and prosecution by the prior administration when few others would. America would not be the crypto capital of the world today if not for the clear-eyed and thoughtful perspective on regulatory oversight that she brought to bear day in and day out for years as an SECGov Commissioner and leader of the agency’s Crypto Task Force. I applaud Commissioner Peirce for her more than eight years of public service. It has been an honor to serve with her. She has been a great influence on me and will no doubt inspire a new generation of lawyers in her next chapter as a professor.”
CONGRESS
Digital Asset Tax
Sen. Steve Daines (R-MT) said, “It’s time to get moving forward. The uncertainty of the current structure impedes the ability of the United States to take the lead in innovation and continue to be the world leader.” (Politico)
Daines posted “Digital assets have moved into the mainstream, but the tax code hasn’t kept up. My bill would create clearer rules for stablecoins, network fees, staking and lending—while extending familiar tax rules like wash sales and constructive sales to digital assets.”
On passage of a crypto tax bill this Congress, Sen. Cynthia Lummis (R-WY) said, “It will surprise me if anything tax-related on digital assets gets done this year.” (Punchbowl)
On the House Ways and Means bill, Lummis said, “I think it’s missing an important component, but I think that’s all [Smith] could get passed on a bipartisan basis.” (Punchbowl)
Senate Finance Chair Mike Crapo (R-ID) said, “All the interest that there can be, in terms of working out the different approaches that people are putting forward, is helpful because then we see what solutions and ideas are there and what support there is for it.” (Punchbowl)
Senate Finance Ranking Member Ron Wyden (R-OR) said, “I think it’s going to be a big lift. The big thing with the crypto stuff is it mostly is graft as it relates to the Trump family, and that’s what I’m mostly bothered by.” (Politico)
Sen. Catherine Cortez Masto (D-NV) posted “There are strong bicameral discussions on this issue and Chairman Smith and RepHorsford have advanced a thoughtful proposal. I am especially pleased that it includes our legislation to fix the gaming losses tax that has harmed Nevada. Certainty for taxpayers with digital assets is an important issue, and I look forward to working with my colleagues in the Finance Committee on bipartisan solutions.”
Rep. Jason Smith (R-MO) posted “I commend Senator SteveDaines for introducing the Aligning Digital Assets with Principles of Taxation Act. This bill has much in common with the Digital Asset Tax Certainty Act, which passed out of the Ways and Means Committee on a strong bipartisan vote. There is also clear momentum building to deliver tax certainty to digital asset owners and ensure America remains the crypto capital of the world.”
CLARITY Act
Sen. Cynthia Lummis (R-WY) posted “Democrats demanded disclosures for customers to protect their crypto in a broker bankruptcy, giving them the protection FTX customers never had. Democrats voted against those efforts to protect consumers from another FTX-style bankruptcy loss when they all voted against the Clarity Act.”
Lummis also posted “Democrats wanted the FTC to keep full authority over consumer protection and fraud enforcement for NFTs. The Clarity Act preserves it. Democrats voted against protecting Americans from NFT scams and fraud.”
Lummis also posted “Democrats demanded crypto platforms give customers clear, plain-language education on digital asset risks and fraud before they invest. The Clarity Act requires it. Democrats voted no.”
Lummis also posted “Democrats negotiated changes to the Keep Your Coins Act, protecting Americans’ right to hold their own digital assets. Their edits are in the Clarity Act, but they still voted against protecting Americans’ right to hold their own digital assets.”
Sen. Tim Kaine (D-VA) posted “GOP heading into mid-terms facing voters angry about sky high costs on energy, health care, food, gas. So what do Senate R’s spend September on in Congress?—pushing a bill to help Crypto industry (and failing)—voting down a resolution to end the Iran War—running down the clock on a college sports bill that the House can’t even take until November. Lame!”
Illicit Finance
Sen. Richard Blumenthal (D-CT) posted “Tether seemingly has no shame—profiting from insidious use of its stablecoin for money laundering by Iran, drug traffickers & other illicit enterprises. Time to crackdown”
Blumenthal also posted “The Trump Admin’s glaring lack of oversight of cryptocurrency issuers has undermined our own national security interests. That is why I am calling on the Dept of Treasury & Justice to immediately investigate Tether & hold it accountable for these potential sanctions violations.”
Blumenthal also posted “My new PSI report exposes how Tether & its flagship token have become central to Iran’s shadow banking system, allowing the Iranian government to fund its regional proxies, commit human rights abuses, & pursue hostile drone & missile programs as they defy our sanctions regime.”
Miscellaneous
Senate Majority Leader John Thune (R-SD) delivered remarks saying, “I said a couple of weeks ago that we had a big, but limited, opportunity to get some really consequential things done. And unfortunately, it’s been very shameful that the Democrats have decided to play politics rather than to work with us to do what I believe is really consequential legislation. And the two most recent examples of that are blocking getting on the Clarity Act – which was incredibly necessary for our financial services markets for digital assets, and they blocked it, even getting on it on the floor of the Senate. And then now we’ve got them also not taking yes [for an answer] on permitting reform.” (Press release)
On his investigation into prediction market companies, House Oversight Chair James Comer (R-KY) said, “As online prediction platforms grow and become more mainstream, some bad actors have exploited the platforms to make thousands of dollars by placing bets based on nonpublic information. The House Oversight Committee is investigating whether these platforms are fulfilling their legal obligations and doing enough to identify and prevent insider trading before it happens.” (Press release)
Comer posted “I’m expanding the House Oversight Committee’s investigation into insider trading on prediction markets. People with nonpublic information are placing bets online and taking major profits. More needs to be done to prevent it.”
On CLARITY Act ethics negotiations, Senate Minority Leader Chuck Schumer (D-NY) said, “People do not want to see Donald Trump be able to use his presidential authority to make money out of crypto, and that’s the bill. We told the crypto people, stop that and break from Trump, and we might have an agreement. They didn’t.” (Punchbowl)
Sen. Cynthia Lummis (R-WY) posted “Wyoming chartered the nation’s first digital asset banks and built a legal framework that has set the standard for digital asset regulation in the United States. I’m very pleased the Wyoming Division of Banking has partnered with the New York Department of Financial Services for streamlined chartering and joint supervision of entities engaged in digital asset activities.”
Rep. Steven Horsford (D-NV) posted “Are prediction markets gambling? That’s the question nytimes is asking today on The Daily, and exactly why I introduced the bipartisan Prediction Markets Are Gambling Act with Rep. Amodei. Companies offering sports bets shouldn’t be able to bypass gaming laws by calling them financial products. Nevada’s workers and consumers deserve protection. State and tribal gaming laws must be respected.”
What I’m Reading This Week
Trump Loses Favor with Crypto Fans Who Call Him Out for Cashing In, Isaac Arnsdorf, Washington Post.
Are Sports Event Contracts on Prediction Markets Gambling for Federal Tax Purposes?, Seth Hanlon, Miles Johnson, Michael A. Kaercher, Kyle Sweeney, and Sophia Yan, Tax Notes.
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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