The White House released its inaugural digital asset policy report on July 30, 2025, “Strengthening American Leadership in Digital Financial Technology.” This milestone document marks the first coordinated federal response to the rapidly evolving digital asset landscape. It was developed by the President’s Working Group on Digital Assets in direct response to Executive Order 14178, signed on January 23, 2025 (published on January 30, 2025) which called for a comprehensive market assessment within 180 days delivered to the Assistant to the President for Economic Policy (APEP). The report lays the foundation for America’s strategic approach to blockchain innovation, stablecoins, decentralized finance (DeFi), and the global competitiveness of U.S. digital financial infrastructure.

Underscoring the moment, Treasury Secretary Bessent said: 

“America is a frontier nation. From the Lewis and Clark Expedition to the present day, our people have always pushed boundaries—in exploration, politics, science, and technology. To be American is to be constantly moving, constantly innovating, and constantly living on the edge of what is possible. It’s only fitting, then, that we build the future on the frontier of digital finance.”

Established under Executive Order 14178, the Working Group operates within the National Economic Council and is charged with developing U.S. policy frameworks for digital assets—aimed ”to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.” The Working Group defines blockchain as any technology that: 1) shares data across a public network to create a digital ledger, 2) uses cryptography to secure the network, and 3) is built on open-source code. Based on this definition, even though the Kaspa network utilizes a blockDAG architecture, it qualifies as blockchain technology.

It is chaired by David Sacks, the Special Advisor for AI and Crypto, and includes senior officials or their designees, including the Secretaries of the Treasury, Commerce, and Homeland Security, the Attorney General, the Director of the Office of Management and Budget, the Assistants to the President for National Security, Economic Policy, and Science & Technology, the Homeland Security Advisor, and the Chairpersons of the SEC and CFTC.

The report mandated by Executive Order 14178 was expected to focus on two key areas: the federal regulatory framework for digital assets and the potential development of a national digital asset stockpile. 

The following article highlights key insights from the 166-page report, focusing on the most relevant points for the Kaspa community. Rather than covering every detail, we’ll spotlight the sections with the greatest potential impact.

Digital Asset Ecosystem

Since the launch of Bitcoin in 2009, the digital asset landscape has expanded substantially, encompassing a wide range of products and participants that collectively manage trillions of dollars in transactions globally. Digital assets are forms of value recorded on blockchains or distributed ledgers, with ownership secured through cryptographic consensus mechanisms.

The ecosystem includes several key participants. Issuers, ranging from individual developers to established firms, create tokens for a variety of purposes, including utilities, securities, and stablecoins. Retail users help drive adoption by trading assets through exchanges and decentralized applications. Institutional investors such as hedge funds and asset managers are increasingly entering the space through custody services and over-the-counter desks. Centralized exchanges (CEXs) provide platforms for trading and custody while operating under regulatory compliance. In contrast, decentralized finance (DeFi) protocols offer financial services like lending and trading through smart contracts without intermediaries. Developers, validators, and infrastructure providers support these systems by maintaining networks and securing blockchains using consensus mechanisms like proof of work and proof of stake.

Trading is a major component of the digital asset market, occurring on both centralized and decentralized platforms. It includes spot trading as well as derivatives like futures and perpetual contracts. Custody options vary. Users can manage their own assets through non-custodial wallets where they control private keys, or rely on regulated custodians such as banks or trust companies. Wallets are categorized as either “hot” (connected to the internet) or “cold” (offline), with more advanced options such as multi-signature setups or multi-party computation. (To read more about Kaspa wallets, please see our wallet guide, KASmedia’s Kaspa Wallet Guide for Hot and Cold KAS Storage.)

Settlement often happens instantly on-chain, although some centralized platforms match trades off-chain and only settle on-chain during withdrawals. Lending and borrowing activities use digital assets as collateral and are available through DeFi platforms or institutional services. Tokenization allows for the digital representation of traditional financial and tangible assets, making transfers more efficient and enabling new, programmable financial products.

Despite technological progress, the ecosystem carries several risks. Custodial failures, fraud, hacking, and conflicts of interest can lead to major losses. Self-custody reduces reliance on intermediaries but introduces the risk of permanent loss if private keys are lost. Privacy is another concern. While transactions are pseudonymous, data analysis and compliance requirements such as know-your-customer (KYC) policies can compromise user anonymity. Operational risks include network outages, software bugs, and interoperability issues between different systems.

The U.S. government supports technical standards through organizations like IEEE, ISO, and NIST to promote interoperability, trust, and cybersecurity. One future threat is quantum computing, which could undermine existing public-key cryptography. While this is not an immediate concern, it is expected to become more relevant within the next five to ten years.

To address this, the National Institute of Standards and Technology (NIST.gov) began the post-quantum cryptography (PQC) standardization project in 2016. In August of 2024, NIST released three Federal Information Processing Standards (FIPS) for post-quantum cryptography,  developed to withstand potential future threats posed by quantum computers, including the: Module-Lattice-Based Key-Encapsulation Mechanism Standard, Module-Lattice-Based Digital Signature Standard, and the Stateless Hash-Based Digital Signature. The NIST urges technology to begin implementing these PQC standards to prepare for a post-quantum computer era. 

Adopting these new cryptographic standards, a process called cryptographic agility, presents significant technical challenges. This is particularly true for decentralized systems where governance is distributed and data is immutable. Maintaining U.S. leadership in cryptographic standards and post-quantum resilience will be essential to protect digital financial infrastructure and national security.

The Kaspa core development team is aware of the long-term risks posed by quantum computing. As a decentralized protocol focused on speed, scalability, and resilience, Kaspa continues to monitor developments in cryptography and remains committed to securing its network against future threats.

Digital Asset Market Structure

Pseudonymous Bitcoin creator, Satoshi Nakamoto, envisioned a digital financial marketplace where participants engage directly in peer-to-peer transactions, with no need for intermediaries, just like our current exchanges. Luckily for us, the cryptocurrency industry is not limited to exchanges, and opportunities to utilize the technology are endless. As the White House report states: 

“Capital across the globe flowed into the space because blockchain technologies could fundamentally transform financial systems, challenge traditional business models,  redefine concepts of governance and ownership, and much more. Many innovations, such as tokenization, can introduce efficiencies into existing financial services like lending, trading, insurance, and capital formation. Fortunately, for the United States and the world, many years of innovation lie ahead.”

The report emphasizes that “it is imperative that the United States lead by establishing clear rules for digital asset markets.” While it showcases the steps taken since January 2025 by the regulating bodies, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), there is still much work to be accomplished to achieve compliance standards similar to those found in traditional finance. 

One such task is to establish a taxonomy for digital assets—create a “clear and comprehensive classification system.” The White House report recognizes the following categories:

• Security Tokens: those that represent an ownership stake in equities, bonds, or security-based swaps; anything offered as part of an “investment contract” (including non-security digital assets); tokenized securities

• Commodity Tokens: digital assets that fall outside the definition of securities; commodity token derivatives. Federal courts and the CFTC have established that BTC and ETH are commodities.

• Network Tokens, also known as Protocol Tokens, enable users to engage in a decentralized, open network; they do not grant profit-sharing rights

• Tokens for Commercial and Consumer Use: non-fungible tokens (NFTs); a digital form of conventional commercial instruments.

Kaspa is considered a Commodity “Token”

The report urges the SEC and CFTC to coordinate efforts to “enable the trading of digital assets” by amending current rules, and providing comprehensive regulatory clarity. One legislative proposal is The House of Representatives’ Digital Asset Market Clarity Act of 2025 (CLARITY),  H.R. 3633, 119th Congress). The bill recommends granting the Commodity Futures Trading Commission (CFTC) explicit authority over spot markets for non-security digital assets, while allowing both the Securities and Exchange Commission (SEC) and CFTC registrants to operate multiple business lines under streamlined licensing frameworks. This approach aims to reduce overlapping regulations and create a unified, efficient oversight system that supports market diversity and prevents regulatory arbitrage.

Congress is encouraged to preempt conflicting state laws for registered intermediaries to ensure national consistency. It also recommends tailored registration regimes for trading platforms, brokers, custodians, and other service providers, designed to reflect the specific nature of their activities without imposing undue burdens compared to traditional financial markets. Transparency and consumer protections are highlighted through recommended disclosure requirements to better inform users and investors.

The report supports the creation of regulatory frameworks that integrate innovation and security in regards to Decentralized Finance (DeFi), stating: “the integration of DeFi into mainstream finance has the potential to unlock new economic opportunities and drive significant advancements across various industries and sectors.” One word of caution was that due to the nature of most DeFi protocols, it would be difficult to enforce AML/CFT standards in compliance with the Banking Secrecy Act (BSA). 

One goal of the report is to establish a digital asset structure that could result in a less-fragmented digital asset ecosystem, worldwide, which would further global innovation across an unlimited number of industries.  

While Kaspa is clearly classified as a commodity under US law, we look forward to regulatory clarity in the US for the many KRC20 tokens, KRC721 NFTs, DEXes, and other applications. 

Banking and Digital Assets

Digital asset innovation in the US was significantly stifled due to the Biden Administration’s Operation Choke Point 2.0. Today, under President Trump’s leadership, efforts are underway to reverse prior restrictions and re-establish a more favorable regulatory climate. A major milestone came in July 2025, when the OCC, FDIC, and Federal Reserve Board issued a joint statement affirming that banks have the legal right to interact with digital assets.

(For more information on this joint statement, please see our article, “The Weekly Knight: Crypto, Finally Legal! Major Crypto Bills Pass: What Does This Mean For Kaspa”.) 

Many banking products and services are already directly or indirectly involved with digital assets. Access to traditional services, such as deposit accounts, payments, and lending, is essential for digital asset firms to function effectively. These services support critical operations like managing cash flow, payroll, and infrastructure.

Beyond access, financial institutions are increasingly exploring the use of distributed ledger technology (DLT). DLT is being considered for faster payments, tokenization of traditional assets, and improved settlement mechanisms. As noted in the White House report, “Tokenization has the potential to transform execution, settlement, and other banking activities.” DLT-based systems could automate payment flows and reduce settlement times, with stablecoins potentially playing a key role.

Banks are also evaluating roles in digital asset custody, as institutional investors seek secure, regulated solutions for storing large holdings. Other opportunities include offering digital asset trading, either directly or via third-party platforms, and issuing loans collateralized by digital assets. The report emphasizes that, “Banks should be able to engage in permissible digital asset activities in a safe and sound manner without prior regulatory approval or notice. Further, the Banking Agencies should monitor banks digital asset activities through an appropriate supervisory process”.

To further integrate into the financial system, digital asset firms may apply for a bank charter if they provide core services such as custody, lending, or payments. Bank charters enable legal operation as a bank, subject to capital requirements, liquidity standards, and consumer protection rules, and are necessary for companies offering a full suite of financial products. Firms may also seek access to Federal Reserve master accounts and payment services, which can lower transaction costs and counterparty risks while enabling access to the Fed’s balance sheet. The Reserve Bank master account gives access to the Federal Reserve’s Balance sheet. 

In addition to bank services, Federal Credit Unions may also pursue digital asset opportunities, including tokenization, custody, lending, and broader member access. The National Credit Union Association (NCUA) currently permits such engagement, provided credit unions comply with all applicable regulations.

On the global stage, the Basel Committee on Banking Supervision (BCBS) issued crypto asset risk standards in 2022 and updated them in July 2024. These guidelines classify digital assets into two categories with further subsets. While the BCBS lacks legal authority, the U.S. encourages the Committee to revisit its standards, especially regarding capital requirements for crypto exposure.

Insurance, a critical piece of the traditional financial system, is also addressed in the White House report. In the U.S., insurance is regulated at the state level, and most policies (e.g., homeowners insurance) currently do not cover digital asset losses. The report suggests reviewing the definitions of property, currency, and securities to explore pathways for offering insurance coverage for digital assets.

Kaspa Industrial Initiative (Kii) is actively engaged in multiple insurance pilot programs, positioning Kaspa at the forefront of this evolving sector. Sharing progress with U.S. insurers and financial institutions could strengthen Kaspa’s role as a serious contributor to the next generation of financial infrastructure.

(To read more about the Kaspa Kii insurance programs, please see our article titled A Clean Kaspian Future: Desert Energy, Clean Energy Trading and Kaspa Kii. 

Stablecoins and Payments (p.87)

The Guiding and Establishing National Innovation for Stablecoins Act (GENIUS) was signed into law on July 18, 2025, by President Trump. The legislation provides long-awaited legal clarity for stablecoins and represents a significant shift in U.S. digital asset policy. (For more details on the GENIUS bill, please see our article, “The Weekly Knight: Crypto, Finally Legal! Major Crypto Bills Pass: What Does This Mean For Kaspa”.) 

Stablecoins are digital assets pegged 1:1 to liquid assets, such as the U.S. dollar or short-term U.S. Treasuries. They serve as a utility that can help bring payments closer to real-time settlement. According to the Financial Stability Board’s G20 Roadmap for Enhancing Cross-Border Payments (October 2024), only 33.5% of retail cross-border payments settle within the first hour—highlighting just how inefficient traditional financial rails can be. These delays increase costs and introduce risk across global payment systems.

Demand for stablecoins has grown rapidly. According to DeFi Llama, roughly 99% of stablecoins are pegged to the U.S. dollar. While their most common use remains within DeFi protocols and smart contract platforms, stablecoins have strong potential to facilitate cross-border payments. Their adoption could significantly reduce settlement times and lower transaction costs. U.S. leadership in stablecoin regulation would not only reinforce AML/CFT compliance but also help preserve global dollar dominance in a tokenized world.

To operate legally in the United States, stablecoin issuers must comply with regulations under the Bank Secrecy Act (BSA) and often require state-by-state money transmitter licenses, unless granted federal approval under a new licensing regime.

Importantly, Executive Order 14178, which frames the administration’s broader digital asset policy, prohibits the adoption of a Central Bank Digital Currency (CBDC). As the report explains:

“Retail CBDC efforts, both domestically and abroad, pose severe risks to individual rights, financial systems, and the sovereignty of the United States. In contrast, private-sector technological innovations like stablecoins and other forms of tokenized assets preserve economic liberty.”

In short, the GENIUS Act establishes a path forward for private-sector stablecoins, while making it clear the U.S. will not pursue a retail CBDC. This move aligns with the values of free enterprise and individual financial autonomy.

Kaspa currently lacks native stablecoins, but the Kaspa Industrial Initiative (KII) is spearheading development on several fronts to bring stable-value assets to the network. These initiatives aim to align with Kaspa’s unique architecture and enable use cases such as cross-border payments, DeFi applications, and seamless real-world integration.

Countering Illicit Finance (p.99)

In a significant shift from past policy, FinCEN announced the withdrawal of two proposed digital asset regulations, and the U.S. Department of Justice (DOJ) committed to ending the Biden-era approach of “regulation by prosecution.” This signals a broader move toward fostering innovation rather than punishing technological advancement in the digital asset space.

Although digital assets can, like any currency, be misused by bad actors for criminal purposes, the scale of illicit use remains low. Contrary to widespread perception, reports from Chainalysis and TRM Labs indicate that less than 0.5% of total crypto transaction volume in 2024 was linked to illicit activity. This figure declined from the previous year. While digital asset-related fraud still exists with over $9 billion in 2024, according to the FBI, of which roughly$6 billion in investment schemes, the data shows that traditional finance still poses a far greater threat in terms of financial crime.

This evolving perspective creates an opportunity to reframe the national conversation around digital assets: from fear of misuse to the potential for innovation and responsible growth.

The report emphasizes the need to modernize the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework. While retroactive enforcement is not feasible for many decentralized protocols, future digital asset projects, particularly stablecoins, can be designed with embedded compliance features, including on-chain monitoring tools to flag suspicious activity.

Since 2013, FinCEN has issued guidance on when digital asset activity constitutes a money services business (MSB). Updates in 2019 clarified treatment for peer-to-peer exchanges. Despite these efforts, oversight still lags in the DeFi space. The report calls for clearer definitions and application of BSA obligations in DeFi ecosystems, while noting that merely publishing code, as in a 2014 ruling, does not constitute value transmission. 

Financial institutions are required to file Suspicious Activity Reports (SARs) for transactions lacking a clear purpose or suspected of involving illicit activity. However, SAR compliance is often viewed as inefficient. To improve this, the Treasury is working on technology upgrades that streamline filing and improve analytical value. OFAC (Office of Foreign Assets Control) will also continue identifying and blocking digital asset addresses linked to malicious foreign actors.

The report calls for statutory changes to better align the BSA with digital asset institutions. This includes clarifying how AML obligations apply to wallet providers, custodians, and DeFi protocols. The administration recommends creating fit-for-purpose regulatory frameworks that account for the unique nature of blockchain systems.

Supervision is another area targeted for reform. Agencies will expand guidance for risk assessment and increase examiner expertise in digital asset technologies. This should allow for more effective oversight while minimizing regulatory friction for compliant actors.

Additionally, the report advocates for digital identity tools that preserve user privacy while enhancing AML compliance. These could include self-sovereign identity systems or selective disclosure frameworks. Public-private collaboration is also encouraged, as many investigations begin with tips from crypto firms. Tools and resources should be made available to help these actors mitigate risk proactively.

On the enforcement side, the administration proposes updates to criminal statutes to better address digital asset-related crimes. This includes:

• Criminalizing false statements to financial institutions involving digital assets

• Enhancing penalties for digital asset theft

• Extending civil forfeiture capabilities

• Adding anti-tip-off protections to preserve ongoing investigations

• Improving victim compensation mechanisms related to crypto fraud

Section 311 of the USA PATRIOT Act, which allows special measures against jurisdictions and institutions posing money laundering concerns, could be adapted for the digital asset ecosystem. The report also suggests tailoring OFAC sanctions to more effectively disrupt foreign actors using blockchain tools for cybercrime or evading sanctions.

Finally, the report underscores the importance of protecting the industry from increasingly sophisticated cyber threats. Enhanced coordination, real-time intelligence sharing, and updated legal tools are all seen as necessary to shield the digital asset space from foreign interference and domestic abuse.

Kaspa is a decentralized, fair-launch ecosystem with no centralized authority and no built-in AML/CFT mechanisms. This absence reflects a commitment to user freedom and privacy. However, as stablecoins, like a possible KUSD, are developed for potential use in the U.S. or international finance, regulatory compliance will likely need to be considered.

Taxation (p.127)

The July 2025 White House report on digital assets outlines a number of urgent updates and legislative recommendations aimed at modernizing the U.S. tax code to keep pace with the rapidly evolving crypto economy. While regulatory frameworks continue to take shape, the report emphasizes gaps in tax treatment and reporting obligations that affect both everyday users and institutional actors in the digital asset space.

One major change already enacted came through H.J. Res. 25, which overturned a previous Biden-era effort that sought to classify software developers as brokers for tax purposes, even when those developers did not custody or control users’ digital assets. Sponsored by Senator Ted Cruz and Representative Mike Carey, the resolution was signed into law by President Trump in April 2025, marking a reversal in how the federal government interprets third-party tax responsibilities.

The Treasury Department and IRS have issued both substantive and procedural guidance on how digital assets are taxed, particularly focusing on broker reporting and third-party transaction disclosures. However, questions remain unresolved, especially in light of newer technologies like staking, wrapping, and NFTs.

The report notes that FAQs issued by the IRS, dating back to 2014, remain outdated and lack the breadth needed to address today’s market. There’s a clear call for the agency to issue updated guidance covering essential issues such as:

• How digital assets are valued across different exchanges

• Whether NFTs should be treated as collectibles

• Loss treatment rules for digital assets

• How donations of crypto are handled under charitable contribution rules

• Taxation of mining, staking, airdrops, and hard forks

In addition to tax guidance, corporate tax laws, such as the Corporate Alternative Minimum Tax (CAMT) introduced by the Inflation Reduction Act of 2022, could indirectly affect how digital assets are taxed, despite not explicitly referencing them. The report raises concern that CAMT, as currently structured, may conflict with the direction of Executive Order 14219, creating regulatory inconsistencies.

A key legislative recommendation is the creation of a new tax category for digital assets, which would apply modified versions of rules traditionally reserved for securities and commodities. The report highlights that stablecoins, in particular, exist in a legal gray area: their classification under current tax law is unclear, and new laws should define them, possibly as a form of debt instrument given their function and risk characteristics. Such classification would have implications for gain or loss treatment and could improve their use as cash equivalents.

Additionally, the report advocates for:

• Expanding the wash-sale rule to cover digital assets (excluding payment stablecoins)

• Amending Section 1058 to allow tax-deferred treatment for loans of actively traded, fungible digital assets, mirroring rules already in place for securities

• De minimis rules for small-value receipts of crypto from events like staking, airdrops, or mining, especially for non-commercial users

• Adoption of the Crypto-Asset Reporting Framework (CARF) to streamline foreign reporting and improve international transparency

• Enhancements to basis reporting requirements, including potential annual statements to help taxpayers and regulators track gains and losses accurately over time

While the IRS and Treasury have provided some transitional relief to digital asset exchanges implementing new broker regulations, the report makes clear that more administrative and legislative work is needed to modernize tax policy for the digital age.

While Kaspa does not rely on centralized intermediaries, users and ecosystem participants engaging with wallets, bridges, or potential future DeFi platforms may be impacted by the IRS’s broadened definitions and reporting expectations. As the ecosystem matures, it will be important to align user-facing tools with regulatory clarity in a way that preserves the network’s core values and supports sustainable growth.

Table of Recommendations

The final section of the report presents a table of recommendations, indicating whether each policy item is directed toward Congress or to specific regulatory agencies. These include the Treasury, IRS, CFTC, SEC, FASB, Federal Reserve Board, FDIC, OCC, Department of Commerce, NCUA, FHFA, DOJ, and the Digital Asset Working Group.

The final page of text in the White House’s July 2025 digital assets report addresses Executive Order 14178, which tasked the crypto working group with evaluating the creation of a national digital asset stockpile. It also responds to Executive Order 14233, which formally establishes the United States' policy to create a Strategic Bitcoin Reserve. The report clarifies that this reserve will be overseen by the Treasury and composed of forfeited digital assets held by the federal government. Custody of the reserve will be jointly managed by the Treasury and the Department of Commerce, in coordination with the Digital Asset Working Group, as outlined in E.O. 14233.

Kaspa-Related Recommendations Based on the White House Digital Assets Report:

• Develop a KUSD Stablecoin: Issue a Kaspa-based stablecoin (KUSD) backed 1:1 by U.S. dollars and short-term Treasury securities. Ensure it complies with AML/CFT requirements to align with regulatory expectations.

• Insurance Industry Collaboration: Share details of the Kaspa KII insurance pilot with U.S. insurance firms to explore potential adoption of blockchain-based risk solutions.

• Engage Regulated Intermediaries: Proactively reach out to CFTC-registered entities, such as exchanges, brokers, dealers, and other intermediaries, to pursue Kaspa spot listings and increase institutional access.

• Legal Classification Letter: Obtain an opinion letter from a U.S.-licensed attorney that affirms Kaspa's classification as a commodity under U.S. law, reinforcing CFTC jurisdiction.

• Launch a PQC Task Force: Establish a working group dedicated to integrating the three federally endorsed post-quantum cryptography (PQC) standards into the Kaspa protocol.

• Partner with Financial Service Providers: Collaborate with banks, fintechs, and payment processors to pilot digital ledger-based innovations, especially in areas such as cross-border payments and settlement infrastructure.

Conclusion

With its high-performance DAG architecture and commitment to decentralization, Kaspa is well-positioned to contribute meaningfully to this vision, and help lead the next chapter of blockchain innovation.

I want to share the words of Treasury Secretary Scott Bessent’s remarks in terms of this momentous report:

“I would like to close with a message to entrepreneurs, disruptors, and innovators all over the world: America’s digital asset frontier is open again…. we are exploring new possibilities in decentralized computing and digital payments to unlock the promise of blockchain technology. We are working arm in arm with the brightest minds in finance to build the crypto capital of the world—and we want you to build it with us.”

Let’s build on Kaspa.