Strategic Bitcoin Reserve (SBR) Funds Gaining Traction
On February 4, 2025, newly appointed crypto czar David Sacks announced that a bicameral crypto working group is evaluating the feasibility of an SBR, distinguishing it from traditional sovereign wealth funds. This initiative aligns with a proposal by Senator Cynthia Lummis, who introduced a bill in July 2024 advocating for the U.S. Treasury to acquire 200,000 bitcoins annually over five years, aiming for a total reserve of one million bitcoins—approximately 5% of Bitcoin’s total supply. The funding for these acquisitions would derive from profits on Federal Reserve banks’ deposits and gold holdings, with a mandated holding period of at least 20 years.
Globally, the concept of national Bitcoin reserves is gaining traction. El Salvador has been a pioneer in this space, currently holding over 6,000 bitcoins as part of its national reserves. In Europe, discussions are emerging, with Czech National Bank Governor Aleš Michl expressing interest in incorporating Bitcoin into the country’s reserves. However, European Central Bank President Christine Lagarde has dismissed the possibility of holding bitcoins in ECB reserves, maintaining a cautious stance. Additionally, more than a dozen U.S. states are considering strategic Bitcoin reserve integrations into their public finance strategy. New Mexico has proposed allocating up to 5% of its state-managed funds into Bitcoin reserves, positioning itself as a potential leader in state-level digital asset adoption.
SEC Continues to Shift Towards Pro Cryptocurrency Regulation
The SEC is scaling back its dedicated crypto enforcement unit, reallocating some of its more than 50 staff members to other divisions. Trump’s appointment of Paul Atkins as SEC Chair and Mark Uyeda as interim president signals a departure from the aggressive enforcement strategy pursued by former Chair Gary Gensler, who cracked down on the industry following the collapses and fraud scandals of 2022. SEC Commissioner Hester Peirce, a well-known crypto advocate, is now leading a task force that is reviewing the agency’s approach, prioritizing clearer token classification, revisions to custody rules, and a potential shift away from enforcement actions based solely on registration violations. Notably, the SEC still has ongoing cases against major crypto firms, including Coinbase, though expectations are growing that such actions may be reconsidered.
In addition to regulatory adjustments, the SEC is working within the framework of Trump’s executive order, which set deadlines for agencies to assess and refine their guidance on digital assets. The timeline includes a February 22 deadline for identifying relevant regulations, a March 24 deadline for submitting recommendations, and a July 22 deadline for delivering a final report to the president. Former SEC senior counsel Adrienne Gurley anticipates that greater regulatory clarity will foster confidence in the market and encourage institutional participation, particularly in the crypto custody sector. The potential expansion of traditional banks into crypto custody and lending, alongside SEC rule changes, could accelerate approval for crypto ETFs with in-kind creation and redemption mechanisms. While Peirce acknowledges the SEC’s past missteps, she emphasizes that progress will take time, underscoring the agency’s commitment to moving forward with transparency and fair structuring.
A Pivotal Year For Spot Traded ETF Expansion
With spot Bitcoin ETFs now firmly established, with many setting record inflows and outflows in recent weeks, industry leaders are pushing for approvals on funds that track Solana (SOL), XRP, and other altcoins. Franklin Templeton has already filed for a crypto index ETF, signaling that institutional appetite for diversified digital asset exposure continues to grow. Regulatory clarity under the new SEC leadership could pave the way for multiple new approvals, bringing an estimated $30 billion in additional investments into the space. However, challenges remain—futures markets for these assets, a key precedent for SEC approval, are still developing, with firms like VolatilityShares and ProShares racing to establish SOL and XRP futures ETFs.
Beyond traditional asset managers, firms like Bitwise are exploring alternative ETF products, including a potential Dogecoin trust, hinting at the broadening institutionalization of digital assets. CME Group, the largest derivatives exchange, is expected to expand its offerings to include SOL and XRP futures, which could be a crucial step toward eventual spot ETF approvals. If 2024 was the year that institutional Bitcoin exposure became mainstream, 2025 could mark the diversification of crypto ETFs.
U.S. Banks Offering Crypto Custody Services Signals Shift
Historically, strict regulatory measures like the SEC’s Staff Accounting Bulletin 121 (SAB 121) have discouraged banks from entering the crypto custody space by requiring them to report digital assets as liabilities on their balance sheets. However, under Trump’s administration, the appointment of pro-crypto figures such as Paul Atkins as SEC Chair and David Sacks as the White House lead for digital assets is driving a more permissive regulatory environment. Atkins and Sacks are expected to push for the repeal of SAB 121, which could significantly lower compliance costs for banks and remove a key obstacle to widespread crypto custody adoption. Additionally, Trump’s executive order has established a framework with deadlines for agencies like the SEC, OCC, and FDIC to reassess regulations affecting digital assets, with major policy updates expected by mid-2025.
BNY Mellon, Deutsche Bank, HSBC, and Commerzbank are leading the way, leveraging their vast resources to outpace native crypto firms in the custody space. BNY Mellon’s digital asset custody platform, launched in October 2022, was a major step in integrating traditional finance with digital assets, a sentiment echoed by CEO Robin Vince, who described it as the “next chapter” in the firm’s innovation journey. Following this, Deutsche Bank partnered with Swiss firm Taurus to offer digital asset custody and tokenization, while HSBC collaborated with Ripple-owned Metaco to develop tokenized securities custody services. Meanwhile, Commerzbank secured a crypto custody license from German regulators, and Standard Chartered and Nomura have invested in dedicated crypto custody firms like Zodia Custody and Komainu. Traditional banks could eventually dominate crypto custody, either by acquiring crypto-native custodians or building their own solutions, as seen in ongoing institutional expansion efforts. With Trump’s administration favoring deregulation, U.S. banks are poised to enter the space aggressively, accelerating the integration of blockchain technology into mainstream financial services and positioning traditional banks as the primary custodians of digital assets.
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