U.S. Crypto Regulation Recap: States, SEC, and Trump Drive Change

SEC Rules Fiat-Backed Stablecoins Not Securities, Providing Regulatory Clarity

On April 4, 2025, the SEC declared that fiat-backed stablecoins, specifically those pegged to the U.S. dollar and backed 1:1 by reserves, do not qualify as securities. This landmark ruling exempts these "Covered Stablecoins" from registration under the Securities Act of 1933 and the Securities Exchange Act of 1934, alleviating compliance burdens for issuers. The SEC outlined that such stablecoins must be fully backed by low-risk reserves and emphasized that holders do not expect profits or returns, thereby failing the Howey Test and Reves v. Ernst & Young framework. Stablecoin holders redeem tokens at a fixed $1 without interest or yields, with stabilizing mechanisms managed by arbitrage rather than speculation. The ruling distinguishes between non-yield-bearing and yield-bearing tokens, leaving the latter under regulatory scrutiny. This decision provides much-needed clarity amid ongoing legislative efforts for a national stablecoin framework, supported by former President Trump.

California Advances "Digital Assets Act" to Protect Bitcoin Self-Custody Rights for 40 Million Residents

California has updated Assembly Bill 1052, now known as the "Digital Assets Act," to enhance protections for Bitcoin and crypto investors while ensuring self-custody rights for nearly 40 million residents. Amended on March 28, 2025, the bill legally recognizes digital assets for private transactions and forbids public entities from taxing or restricting their use. Additionally, it extends provisions from the Political Reform Act of 1974 to prevent conflicts of interest for public officials handling digital assets. California's influential stance is notable, with 99 businesses accepting Bitcoin and major firms like Ripple and Kraken based in the state. The bill is currently awaiting its first reading in the state legislature, reflecting a national trend toward cryptocurrency regulation, as illustrated by nearly 100 Bitcoin-related bills introduced nationwide. This initiative aims to establish California as a leader in digital asset policy and may inspire similar measures across the United States.

Bitcoin Policy Institute Proposes 'BitBonds' to Support Trump's Strategic Bitcoin Reserve

On April 1, 2025, the Bitcoin Policy Institute proposed "BitBonds," a novel fiscal tool to support President Trump's Strategic Bitcoin Reserve and address U.S. fiscal challenges. BitBonds would offer a 1% annual interest in U.S. dollars, with 90% of proceeds funding government services and 10% directed to bitcoin purchases for the reserve. This initiative aims to leverage approximately 200,000 BTC already held by the government, potentially saving up to $700 billion over ten years by lowering interest costs on federal debt. With $9.3 trillion of federal debt maturing soon, BitBonds could refinance 20% of these needs, saving about $70 billion annually compared to conventional Treasury issuance. This approach not only strengthens the nation's position in the evolving monetary landscape but also democratizes access to bitcoin's growth, enhancing overall U.S. fiscal health without additional taxpayer burden. Secretary Bessent will explore legal and investment aspects within 60 days of Trump's executive order.

Senator Tuberville Introduces Bill to Allow Crypto Investments in 401(k) Plans

U.S. Senator Tommy Tuberville is set to reintroduce the Financial Freedom Act, which would enable Americans to invest their retirement funds, specifically 401(k)s, in cryptocurrencies. Announcing the bill on Fox Business Live, Tuberville criticized the Biden administration for imposing regulations that restricted investment choices and praised President Trump as the "Crypto President." Originally introduced in 2022, the bill seeks to roll back Department of Labor guidance limiting investment options in self-directed 401(k) accounts, arguing that overregulation hampers financial growth and personal liberty. Prominent Bitcoin advocate Senator Cynthia Lummis supports the inclusion of cryptocurrencies in retirement plans. Financial planner Ivory Johnson suggests allocating 2% to 8% of a portfolio to crypto, viewing it as a non-correlated asset class. However, some experts, like Amy Arnott from Morningstar, warn that adding cryptocurrencies could significantly increase risk, potentially leading to substantial losses for investors at critical times.

House Financial Services Committee Advances STABLE Bill

The U.S. House Financial Services Committee voted 32-17 to advance the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) bill, which aims to establish a regulatory framework for dollar-denominated stablecoins. Chair French Hill emphasized the need for regulation to ensure global competitiveness as blockchain technology transforms financial transactions. He stated the importance of keeping pace with these developments for policymakers and regulators. During the hearing, various amendments were discussed, including those relating to former President Trump’s connections to cryptocurrency and potential conflicts of interest. The STABLE bill differs from the Senate's GENIUS Act regarding the regulation of foreign issuers and stablecoin market structures, necessitating a consensus between the two chambers. Additionally, the committee advanced an anti-CBDC bill introduced by House Majority Whip Tom Emmer, highlighting ongoing legislative efforts surrounding cryptocurrency regulation.

SEC and Gemini Seek 60-Day Pause in Legal Battle Over Earn Program

On April 2, 2025, Gemini Trust and the US Securities and Exchange Commission (SEC) jointly requested a 60-day pause in their civil legal battle concerning the unregistered Gemini Earn lending program. This motion aims to explore a potential resolution beneficial to both parties and the public interest, conserving judicial resources. The SEC indicated that it would provide a status update within the requested timeframe. The Gemini Earn program offered high-interest returns for crypto asset loans to Genesis, a Digital Currency Group unit, which faced significant issues, including a Chapter 11 bankruptcy filing after freezing over $1 billion in withdrawals. In an earlier case, Gemini settled with the Commodity Futures Trading Commission for $5 million due to misleading statements. Notably, recent developments saw former SEC investigations against multiple crypto firms, including Robinhood and Coinbase, being dropped, alleviating some pressure from the crypto industry under recent leadership changes.

Alabama Lawmakers Propose Bitcoin Investment Bill as Institutional Interest Surges

On April 3, 2025, Alabama lawmakers introduced legislation allowing the state to invest in Bitcoin (BTC) amid growing institutional interest. This move aligns with similar initiatives across the United States since President Trump’s inauguration, which have fostered a positive regulatory environment for crypto assets. The proposed Senate bill, introduced by State Senator Bill Barfoot, empowers the State Treasurer to invest in digital assets, capping investments at 10% of the fund’s balance. Only cryptocurrencies with a market capitalization exceeding $750 billion over the last year qualify, with Bitcoin currently the sole asset meeting this criterion, boasting a $1.6 trillion market cap. Additionally, Minnesota has proposed a bill allowing state investment in Bitcoin and exempting crypto gains from state income taxes, raising the number of Bitcoin reserve bills to 26 nationwide. Trump's administration has introduced policies aimed at revitalizing the crypto market, contrasting Biden’s perceived regulatory crackdown.

Kentucky and Illinois Dismiss Lawsuits Against Coinbase

Kentucky and Illinois have joined South Carolina and Vermont in dismissing lawsuits against Coinbase over its staking and custody services, signaling a broader shift toward easing state-level crypto regulations. Kentucky’s move followed the signing of House Bill 701, which clarifies that staking and mining are not securities, reflecting growing bipartisan support. Illinois’ dismissal further underscores the push for regulatory clarity, as six states, including California and New Jersey, continue to pursue legal action. Coinbase’s Chief Legal Officer, Paul Grewal, emphasized the need for federal guidelines to avoid inefficiencies in state-by-state litigation. Despite regulatory hurdles, market activity remains high, with Ethereum trading at $1,786.31 after a 6.76% dip and volume surging to $23.91 billion. The dismissals and supportive legislation highlight a positive shift that may strengthen consumer protection and innovation while encouraging more consistent crypto regulation across the U.S., potentially boosting long-term confidence in the industry.

This article has been refined and enhanced by ChatGPT.