The United States is making significant strides toward fostering tokenization-friendly policies aimed at supporting the digital asset industry. On January 23, 2025, President Donald Trump initiated a series of Tokenization Friendly Initiatives designed to promote responsible growth in digital assets, blockchain technology, and decentralized finance (DeFi). These initiatives signal a major shift in regulatory frameworks, encouraging institutional adoption and securing the country’s leadership in digital financial technology.
Key Developments in Tokenization Regulation
A major component of these initiatives was the issuance of an executive order titled Strengthening American Leadership in Digital Financial Technology. This order established a Working Group on Digital Asset Markets, led by White House AI and crypto czar David Sacks, with the goal of formulating policies that encourage the adoption of tokenization across financial institutions.
Additionally, the US Securities and Exchange Commission (SEC) revoked Staff Accounting Bulletin (SAB) 121, which had previously hindered banks and financial institutions from offering digital asset custody services. The removal of this regulatory hurdle is expected to accelerate the adoption of tokenized financial products within traditional banking systems.
SAB 121: A Barrier to Tokenization Now Removed
SAB 121, introduced by the SEC staff on March 31, 2022, imposed stringent accounting requirements on entities offering digital asset custody services. Specifically, it required financial institutions to record customer digital assets as both an asset and a liability on their balance sheets at fair market value (FMV), which significantly increased regulatory capital requirements.
Unlike traditional assets such as securities, digital assets were subject to complex disclosure requirements, including:
- Who controlled the cryptographic keys
- Who maintained internal recordkeeping
- Who was responsible for securing assets against theft or loss
This rule created a substantial financial burden on banks and deterred many from entering the digital asset custody market. According to William Quigley, co-founder of WAX.io blockchain and Tether (USDT):
“SAB 121 placed a significant restraint on banks’ ability to custody cryptocurrency assets. The rescission of SAB 121 will allow banks to tokenize.”
SAB 122: A More Flexible Approach to Digital Asset Custody
The SEC introduced SAB 122 as a more flexible alternative, returning to the pre-SAB 121 accounting standards under GAAP and IFRS. Unlike SAB 121, the new framework does not impose a one-to-one asset-to-liability ratio, making it easier for banks to safeguard digital assets without excessive capital requirements.
However, entities are still required to maintain clear risk disclosures in line with guidelines issued by regulatory agencies. The Federal Deposit Insurance Corporation (FDIC) and other banking regulators continue to engage with the President’s Working Group on Digital Asset Markets to ensure a smooth transition into tokenization.
Implications for Financial Institutions and Market Growth
The shift toward tokenization-friendly regulations has been welcomed by leading financial institutions, including the Bank of New York Mellon (BNY Mellon), which has expressed interest in extending its digital asset custody services. Similarly, the American Bankers Association and blockchain firms such as Etherealize.io have praised the regulatory shift, citing its potential to foster greater institutional participation in digital finance.
The newly formed SEC Task Force, led by Republican Commissioner Hester Peirce, is also working to establish a clear regulatory framework for digital assets. This task force aims to reduce regulation through enforcement actions and instead focus on structured guidelines and disclosure requirements that facilitate institutional entry into the market.
A New Era for Tokenization in the US
The Tokenization Friendly Initiatives introduced by the Trump administration represent a pivotal moment for digital finance in the US. By eliminating regulatory barriers such as SAB 121, the government has opened new doors for banks, investors, and financial institutions to engage with blockchain technology and tokenized assets.
With the backing of major banks, regulatory bodies, and industry leaders, these initiatives are set to accelerate the adoption of tokenization, positioning the US as a global leader in digital financial innovation. As the SEC Task Force continues to refine its approach, the future of tokenized assets looks increasingly promising.
