Regulation and Taxation of Digital Assets: A Turning Point for U.S. Crypto Policy

By Zaher Fallahi, Attorney at Law & CPA
The first quarter of 2026 is proving to be one of the most consequential periods in the evolution of U.S. digital-asset regulation. As someone who advises clients nationwide, from crypto investors and blockchain startups to physicians, dentists, small businesses and individuals with complex cross-border assets, I am witnessing a level of uncertainty and nervous anticipation not seen in years.

Policymakers in Washington are signaling renewed urgency to advance long-stalled crypto legislation, even as federal agencies continue to assert overlapping and sometimes conflicting authority over this rapidly expanding sector. At the same time, major financial institutions, including Morgan Stanley, are accelerating their entry into digital-asset markets, dramatically reshaping the regulatory and tax landscape.

1. Legislative Momentum: A Critical Turning Point

After several unsuccessful attempts in prior sessions, Congress is once again preparing to introduce a comprehensive market-structure framework for digital assets. Senate committees are lining up hearings and markup sessions that could determine whether the United States finally moves toward a unified set of federal rules, or remains governed by fragmented state laws and enforcement-driven policy.

The issues on the table are fundamental:

• Classification of digital tokens (security vs. commodity vs. “something else”)
• Jurisdiction of the SEC versus the CFTC
• Rules for spot crypto markets
• Custody and disclosure standards for intermediaries
• Stablecoin oversight and reserve requirements

Industry observers worry that disagreements over the relative powers of the SEC and CFTC may again derail the process. In particular, the question of whether most tokens are “investment contracts” (SEC’s view) or commodities (CFTC’s position) lies at the center of nearly every enforcement action and compliance challenge in the industry.

2. CFTC vs. SEC: A Growing Turf Battle

The regulatory turf battle is becoming more visible and more aggressive.

SEC Position

The SEC continues to argue that many digital tokens, particularly those sold to raise capital, fall under the Howey test and thus constitute securities. Enforcement actions have targeted exchanges, lending platforms, and token issuers.

CFTC Position

The CFTC maintains that Bitcoin, Ether, and an expanding range of digital assets are commodities subject to its anti-fraud and anti-manipulation jurisdiction. The agency has also signaled interest in expanding authority over spot markets, an area where Congress may ultimately have to choose sides.

Industry Impact

For businesses, the uncertainty is costly. Compliance obligations differ dramatically depending on the governing regulator. Many innovators warn that prolonged ambiguity could push development offshore.

3. Rising Lobbying and Corporate Pressure

Lobbying has intensified noticeably. Industry leaders are engaging lawmakers in unprecedented numbers, urging:

• Clear rules of the road
• Predictable jurisdictional boundaries
• A federal framework pre-empting conflicting state regimes

Companies like Coinbase have escalated their advocacy efforts, warning that regulatory stagnation will harm U.S. competitiveness. Their message is simple: uncertainty is itself a barrier to innovation.

4. New Market Realities: Morgan Stanley and Institutional Expansion

While policymakers debate, traditional financial institutions are moving ahead.

Morgan Stanley—managing more than $8 trillion in client assets—has opened access to crypto funds for all wealth-management clients, including those in retirement accounts. This marks a dramatic shift from prior policies that limit digital-asset exposure to ultra-high-net-worth clients.

Key drivers include:

• The SEC’s approval of generic listing standards for spot crypto ETFs
• The expectation of a new wave of blockchain-based investment products
• Growing demand from retail and institutional investors

Advisors remain cautious, however. Surveys show that many are unsure whether recommending digital assets aligns with fiduciary obligations. Yet wealthy investors overwhelmingly prefer advisors who can offer credible guidance on crypto.

This expansion by major financial institutions demonstrates that—regulated or not—the digital-asset economy is becoming part of mainstream finance.

5. Coinbase and the Move Toward a “Universal Trading Platform”

Coinbase’s recent announcement that it will offer:

• Prediction markets
• Equities trading
• Branded stablecoins for institutions
• Asset tokenization tools
• Future tokenized stocks

signals that the industry is moving beyond traditional crypto trading.

The company’s thesis is clear: everything that can be tokenized will eventually be tokenized.

This includes stocks, bonds, real estate, payments, and even corporate governance rights. As attorneys, CPAs, and compliance professionals, we must prepare for the tax, securities, and regulatory implications of asset tokenization—a frontier that is developing faster than the laws governing it.

6. The Genius Act and the Clarity Act: Brief Overview

Recent legislative proposals such as:

• The “Genius Act”

Aims to encourage blockchain innovation while ensuring user protection. It focuses on safe harbors for developers, operational transparency, and federal research into emerging digital technologies.

• The “Clarity Act”

Seeks to create jurisdictional boundaries between the SEC and CFTC and to define when digital assets qualify as securities. It also includes investor-protection mechanisms and clearer pathways for token registration or exemption.

Both proposals reflect lawmakers’ acknowledgement that the U.S. needs a coherent framework to avoid losing ground to global competitors.

7. Tax Considerations in a Rapidly Evolving Space

From a tax perspective, especially for my clients throughout the country, the major developments include:

• Expanded IRS enforcement of crypto reporting
• New requirements for digital-asset brokers under the “Broker Reporting Rules”
• Increased scrutiny of offshore exchanges and foreign wallets
• Treatment of tokenized assets and wrapped assets
• Potential future guidance on stablecoin taxation

With institutional players entering the field and tokenization accelerating, the tax landscape is becoming more complex. Proper classification of assets, cost-basis documentation, Form 8949 reporting, and FBAR/FATCA compliance remain critical.

Conclusion: The Industry Waits — and the Stakes Are High

As Washington debates the future of digital-asset regulation, the industry stands at a crossroads. The next several months may determine whether the United States becomes a leader in digital-asset innovation, or cedes the field to jurisdictions with clearer frameworks.

For investors, advisors, and businesses, the need for experienced legal and tax guidance has never been greater.