As federal legislators and regulators look to build a regulatory framework around digital assets, this article provides an overview of what the industry can expect for the remainder of the year.

This year, we predict a continued back-and-forth largely consisting of (1) somewhat industry-friendly legislation from proponents in Congress looking to encourage innovation, and (2) increasingly strong rules and enforcement actions from Biden Administration regulators looking to mitigate risk. This will remind many observers of the pro-innovation attitude some in Congress took several years ago in their negotiations with risk-averse regulators concerning the FinTech sector.

Political momentum may have shifted in the favor of risk mitigation as a result of the recent crypto downturn and related consolidation of certain crypto companies. We hope a healthy balance is struck and recommend financial institutions engage with Congress and the executive agencies throughout this consequential year.