Crypto Clarity or Regulatory Capture? A Critical Look at the Trump Administration’s Digital Asset Policy

On July 30, 2025, the Trump administration released the final report of the President’s Working Group on Digital Asset Markets, marking a watershed moment in US financial policy. Described as a blueprint for the 'Golden Age of Crypto,' the report sets forth a sweeping, innovation-driven regulatory agenda to strengthen America’s leadership in digital assets. It outlines legislative priorities such as the CLARITY Act and implementation of the GENIUS Act, alongside other deregulatory agency directives. Yet beneath its pro-growth rhetoric lie troubling signs of regulatory agency capture, ethical conflicts of interest, and a troublesome neglect of systemic and consumer risks.

The report’s vision is unambiguous: the United States must recapture crypto leadership lost under prior administrations. The Digital Asset Market Clarity (CLARITY) Act, recently passed in the House of Representatives with bipartisan support, would give the Commodity Futures Trading Commission (CFTC) primary authority over spot markets for non-security digital assets, a long-standing industry demand. The Securities and Exchange Commission (SEC), by contrast, would retain jurisdiction only over digital assets classified as securities under the Howey Test.

In addition, the report explicitly supports decentralized finance (DeFi) and urges federal agencies to approve novel financial products through 'safe harbors' and regulatory sandboxes. The deregulatory tone is stark: innovation should no longer be slowed by what the report derides as 'bureaucratic delays.'

The administration’s July 18 enactment of the GENIUS Act, the first-ever federal stablecoin framework, is held up as a model for integrating blockchain into mainstream finance. Stablecoins are not just seen as efficient digital money but also as geopolitical instruments capable of reinforcing dollar dominance. Notably, the administration rejects central bank digital currencies (CBDCs) on privacy grounds and calls for passage of the Anti-CBDC Surveillance State Act, a clear preference for market-based solutions over state-controlled payment systems.

The report further encourages modernization of capital and custody rules to enable greater bank participation in digital assets. On taxation, it proposes that digital assets be treated as a distinct class subject to modified versions of existing tax frameworks, a move targeted at simplifying compliance while accommodating innovation.

Yet despite these sweeping reforms, the report conspicuously omits details on one of the administration’s most ambitious initiatives: the Strategic Bitcoin Reserve. First announced in March 2025, the reserve was to include Bitcoin acquired through enforcement actions and 'budget-neutral' acquisitions. But the final report contains only a passing reference to it, while offering no disclosure on operational plans, acquisition mechanisms, or safeguards against market manipulation. This lack of transparency raises serious questions about insider trading risks and price destabilization from government-led accumulation.

More broadly, the administration’s cryptocurrency agenda is marred by unprecedented ethical conflicts stemming from President Trump’s and his family’s direct financial interests in the digital asset sector. These include controlling stakes in meme coin projects, stablecoin issuers, and affiliated investment platforms. Reports of a $1.5 million-per-plate crypto fundraiser and UAE financing using Trump’s own stablecoin suggest a pattern of personal enrichment indistinguishable from public policymaking.

Senator Elizabeth Warren has accused the White House of becoming a 'crypto cash machine,' warning that the appearance, if not the reality, of regulatory capture now clouds major policy initiatives. These concerns are exacerbated by industry-friendly appointments, including SEC Chairman Paul Atkins and White House 'Crypto Czar' David Sacks, whose sympathies lie with deregulatory priorities. While pro-innovation language is not inherently problematic, its coupling with structural conflicts of interest calls into question the administration’s ability to act impartially.

Equally troubling is the report’s failure to engage seriously with systemic financial risk. Although it includes basic references to anti-money laundering measures, it omits meaningful stress-testing of how digital asset markets might transmit shocks during periods of volatility. The framing of regulation as either 'pro-innovation' or 'anti-innovation' falsely assumes a zero-sum dynamic, disregarding the regulatory mandate to promote both innovation and stability.

The document’s consumer protection vision is similarly underdeveloped. It contains few concrete proposals to protect retail investors, this is despite extensive evidence of fraud, hacks, and market manipulation in the crypto space. In emphasizing institutional integration and industry competitiveness, the report largely overlooks retail users, who often bear the brunt of sectoral instability.

Moreover, the administration’s continued reliance on classifying digital assets as either securities or commodities reflects a fundamental limitation in current US regulatory thinking. Many digital assets possess hybrid or emergent features that do not map neatly into legacy financial categories. As I have previously argued in 'The CLARITY Act’s Unfinished Business,' a risk-based classification system grounded in Minskyan financial instability theory would better account for the dynamic, speculative nature of many protocols. Similar lessons emerge from the European Union’s Markets in Crypto-Assets (MiCA) regulation, which combines risk tiering with functional assessments rather than rigid asset labeling.

In summary, the Trump administration’s digital asset policy offers clarity, but not neutrality. Its innovation-forward agenda provides long-overdue regulatory direction, yet its failure to address conflicts of interest, systemic risks, and investor protection undercuts its credibility. The promise of a 'Golden Age of Crypto' cannot rest on ethically compromised foundations.

Sound financial innovation requires more than industry promotion. It demands policy frameworks that are transparent, risk-informed, and immune to personal enrichment. If the United States is to lead in digital asset markets, it must do so with governance that reflects public trust—not private gain.

David Krause is Emeritus Associate Professor of Finance at Marquette University.