Stablecoins, Public Infrastructure, and the Path Forward

TL;DR 🦉 Our proposal: regulate crypto market structure by updating requirements for the intermediaries the SEC and CFTC already oversee. Near-term: issue exemptive orders to create an opt-in “grace period” for existing regulated intermediaries to trade, settle and custody crypto. Longer-term: use notice-and-comment rule-making to provide permanent regulation of intermediary crypto activities. 🧠 Why it matters: creates more robust, competitive U.S. markets, with clear compliance obligations and customer protections. Crypto policy moved fast last year, and that’s good news. Congress passed the GENIUS Act with bipartisan support and made strides on market structure legislation. Meanwhile, the SEC and CFTC quickly began identifying and removing barriers for digital asset innovation and engaging stakeholders for deep discussions on how to provide clarity and relief. But one problem is still slowing the U.S. down: market structure uncertainty. In other words, market participants don’t know what’s allowed, which inhibits further growth of robust, competitive markets and customer protections.  Our solution is simple: use existing SEC/CFTC tools to create clear rules of the road now, starting with a transitional “grace period” through exemptive relief and followed by durable rule-making. Against that backdrop, Owl Explains (now known as the Avalanche Policy Coalition)* submitted comment letters to the SEC and the CFTC explaining how the agencies could create a market structure framework for trading crypto, specifically protocol tokens, independent of legislation. We discussed our ideas with the SEC Crypto Task Force in mid-December, shortly before the publication of the Statement and FAQs that moved in the direction we advocated. We like the terminology “protocol tokens” because it refers to a token that is integral to the functioning of a protocol, the amalgamation of software that provides an operating system or application. This definition is technology neutral, but also covers tokens integral to blockchain networks and all their associated functional protocols and layers including DeFi, L2s, restaking and liquid staking applications, subnets and custom L1s, etc. Our main concept for both agencies is straightforward: regulate market structure through requirements on the intermediaries that they already oversee. The financial services industry has lots of experience with electronic trading, settlement and custody so leveraging existing regulatory infrastructure makes sense. Protocol tokens are just another asset that trades and settles electronically, such that it can be supported by well-established market integrity and customer protection controls. Our idea also recognizes the years of struggle about whether protocol tokens are securities or commodities, and takes the practical approach by having both agencies exert jurisdiction through their regulated intermediaries, which is within their statutory mandates. To kick things off, we suggest the agencies use their exemptive powers to create a transitional “grace period” during which regulated intermediaries could opt in to conducting activities in protocol tokens via a notification and certification process confirming their implementation of relevant policies and procedures. The policies and procedures could cover, as relevant, custody and segregation controls, conflicts of interest, market surveillance and manipulation detection, disclosures, recordkeeping, and operational resilience. The grace period would last while rule-making occurs to adapt rules for regulated entities engaging in protocol token activities. This post briefly explores the agencies’ powers under the Administrative Procedure Act (APA) and elsewhere to grant exemptive relief and conduct rule-making to show how our proposals might be accomplished through existing agency powers. This post is for informational purposes only; it is not legal advice. The relevant laws are complex, and readers should consult counsel before acting on any specific proposal. The Administrative Procedure Act The APA governs how federal agencies develop and implement rules and adjudicate administrative litigation related to such activities. The core principle of the APA is to ensure that agencies operate in a manner that is transparent, enables public participation through a standardized process, and provides for a fair adjudication process. Agency actions are reviewed by federal courts for compliance with the APA and other relevant statutes, as well as the Constitution. Courts will overturn agency actions that are “arbitrary and capricious” or violate congressional intent. The Supreme Court in Loper Bright shed further light on how courts review agency actions. That makes the quality of the agencies’ statutory analysis and rule-making record especially important for any durable crypto market structure framework. The APA provides two primary tools for agency action: rule-making and adjudication. The rule-making process governs how agencies develop new regulations or amend existing regulations. For example, our proposals to the SEC and CFTC suggest developing new regulations and amending existing regulations aimed at creating robust, competitive markets for protocol tokens by regulating existing registered intermediaries. Under the APA, this process would involve proposing rules and soliciting written public comments for some period, usually between 30 and 90 days, depending on complexity. The agencies then review the comments and assess whether and how to incorporate them as they prepare a final rule. Like rule proposals, final rules are published in the Federal Register—the U.S. Government’s official record that is used to announce new rules, among other things. New rules go into effect some period of time after publication. Note, however, that the notice and comment process may be suspended if there is “good cause,” and this is referred to as an interim final rule.  The other main part of the APA, adjudication, is when an administrative agency conducts an enforcement action to address a specific case based on the facts and circumstances, which is not relevant to our proposal but occurred a lot under prior SEC leadership.  Meanwhile, other common agency communications, such as interpretive rules, and general statements of policy are explicitly exempted from the APA. Exemptive Orders In addition to the SEC and CFTC being governed by the APA, Congress provided each agency with its own process for issuing exemptive relief. The agencies’ exemptive order authority complements the APA and allows the agencies to offer regulatory relief and respond to market conditions quickly. As Congress, through legislation, and the agencies, through rule-making, work on crypto market structure, each agency can offer clarity to market participants through exemptive relief, such as the grace period we propose. This can function as a credible bridge: faster than rule-making, but more formal and durable than informal guidance. The authority for these orders comes from specific sections in the foundational laws of each agency. The SEC’s authority is found in both the Securities Act (in Section 28, focusing on creation, registration, and initial sale of securities and codified at 15 U.S.C. §77z-3) and the Securities Exchange Act (in Section 36, focusing on intermediaries and trading and codified at 15 U.S.C. §78mm). Each provides the agency with broad general exemptive authority, “to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.”  The Exchange Act specifically allows exemptive relief via Commission order, which is relevant to our proposal because it relates to regulation of intermediaries. The CFTC’s authority is found in Section 4(c) of the Commodity Exchange Act (7 U.S.C. §6(c), allowing it to exempt any agreement, contract, or transaction if it is consistent with public interest and applicable law, it does not have a material adverse effect on the CFTC or contract market or derivatives transaction execution facility, and the transaction is between “appropriate persons” (essentially, regulated financial services intermediaries and other market participants).  Before implementing an exemptive order, each agency typically provides an opportunity for public comment through publication of information about the proposed exemption in the Federal Register. Agency staff review any public feedback before finalizing the exemptive order. The CFTC typically votes on the issuance of the final order, while the SEC may choose to vote (usually if the issues are novel) or delegate authority to a division director to implement the order.  The result of the exemptive order process is a commission-level action that binds the agency and all regulated entities, which is stronger than non-binding communications, such as a no-action letters, FAQs and division statements. In this way, an exemptive order can offer market participants a transitional grace period through quick and binding agency action to meet the needs of a rapidly evolving market structure. For compliance teams, that durability matters: it supports consistent supervisory expectations and reduces the risk of shifting interpretations. Although mentioned above, this note does not discuss interim final rule-making, which is designed for emergency situations. While it could be relevant to the implementation of our proposal, the agencies right now are content to operate through their interpretive powers, so the exigent circumstances that typically apply to interim final rule-making do not seem present. Why We Advocate for Exemptive Relief and Rule-making Both agencies have recently issued various forms of interpretive guidance on crypto activities to their regulated entities. While these interpretations provide clarity on the agencies’ thinking about specific areas, they do not have the binding effect of an exemptive order or a rule-making. Moreover, our proposed transitional “grace period,” created by exemptive order, would formalize a process for all regulated entities who wish to engage in protocol token activities. And the rule-making process would settle many more issues for regulated entities, giving market participants clarity on how to proceed with their activities in protocol tokens. We believe the agencies have both the opportunity and the power to jump-start robust, competitive markets in the United States. And we know from the interpretive guidance releases that both agencies are thinking carefully about how regulated intermediaries can conduct the activities in crypto. Accordingly, we hope to see exemptive orders and rule-makings in the near future to formalize and solidify this important work and take further action to maintain the competitiveness of the U.S. If you are a market participant, policymaker, or other stakeholder, now is the time to engage. Why? Because the conditions set during a grace period can shape the durable rules that follow. *same Owl, new name

For decades, the ‘Special Relationship’ between the US and UK has been one of shared economic DNA - grounded in markets, common law traditions and a mutual belief that innovation thrives when rules are clear and fair. And given the progress made in both jurisdictions on crypto in the last 12 months, it seemed natural when, at a US delegation visit to the UK in September, The Chancellor of the Exchequer Rachel Reeves, welcomed US Treasury Secretary Scott Bessent, to Downing Street to “reaffirm their deep and historic connection between the world’s leading financial hubs in the United Kingdom and United States.” And so was born the Transatlantic Taskforce for Markets of the Future. What is the Taskforce? The Taskforce is a joint initiative anchored by both countries’ finance ministries and supported by their financial market and digital asset regulators. Its remit is to reduce friction for cross-border capital formation and deepen coordination on digital-asset policy, including how best to supervise firms, support safe market infrastructure, and enable responsible innovation.  At a practical level, the Taskforce is anticipated to deliver options for short-to-medium-term collaboration on digital assets (while legislation and regulation continues to evolve) and to explore long-term opportunities in wholesale digital markets - everything from secondary trading plumbing to tokenized instruments and settlement models.  The chairs and conveners are the US Department of the Treasury and HM Treasury, with participation from relevant regulators focused on capital markets and digital assets. Depending on the topic, that likely includes securities, banking, and payments authorities as well as supervisory teams with active digital asset remits. Importantly, the Taskforce has been framed as a whole-of-markets effort, not a crypto-only silo - which is why capital markets access and wholesale innovation sit alongside digital-asset supervision.  Industry isn’t a formal “member,” but engagement with market participants is clearly anticipated. Recent commentary from senior US regulators and market leaders has leaned in favor of coordinated transatlantic approaches - including concepts like mutual recognition or “passporting-style” access in the long run - precisely because duplicative compliance undermines both competitiveness and safety.  Beyond the Press Statement - What is Achievable? The Taskforce is required to report within 180 days - and there are many helpful areas that it could support: Reducing regulatory fragmentation and increasing reciprocity. Right now, firms operating in both the US and UK often face two different regimes even where the principles are similar; for example, what constitutes custody, or how stablecoin reserves should be held. The Taskforce can help regulators create reciprocity agreements across the two regimes, which lowers compliance costs and uncertainty for everyone. Build mutual confidence and supervisory cooperation. Regulators are more likely to trust each other’s oversight if they understand one another’s frameworks and risk-management standards. That, in turn, could make cross-border approvals and recognition processes faster and smoother, particularly for well-run firms. Strengthen the resilience and competitiveness of both markets. Closer alignment reduces the temptation for firms to choose one jurisdiction over the other, while reinforcing shared standards for transparency, governance, and consumer protection. For investors and users, that should translate into better-functioning cross-border markets. Set the tone for global standards. The US and UK remain highly influential in international financial services supervision. If they can show that proportionate, innovation-friendly regulation is achievable, it gives other jurisdictions a credible model to follow, potentially leading to broader global coherence on digital asset oversight and perhaps even global trading markets. Prioritization from the Nest There are three topics that we’d like to see the Taskforce prioritize: Token Classification for Real-World Asset Tokenization Across the UK and US, it is crucial that a coherent definition is developed of which tokens are going to be regulated. There needs to be clear legal and regulatory standards for tokenized assets, including where the token (the digital representation), and the asset (which should be regulated according to its nature) are one and the same. Broad definitions of “digital assets” or “cryptoassets” risk breaking down this distinction.  The Taskforce should focus on developing this definition collaboratively, to create something pragmatic and implementable across both jurisdictions. 2. Intermediation vs Infrastructure All proposals and rule makings around the world focus on who to regulate and in particular, which actors and activities constitute intermediaries. However, providing infrastructure, whether software, hardware or communications, is not acting as an intermediary. Validators and miners are not intermediaries and neither are API providers, block explorers or analytics firms. Nor is providing self-custody wallets or simply writing code (implementing it can be in very specific situations).  The regulatory frameworks across both jurisdictions would not only benefit from implementing protections to prevent infrastructure providers being regulated as intermediaries, but would also enjoy significant competitive advantage on the global stage as a result. 3. Stablecoins and Reciprocity Stablecoins will sit at the heart of the future of the digital economy, underpinning everything from cross-border payments (for commercial or individual purposes) to on-chain settlement in financial markets. Both the US and the UK are now building comprehensive regimes, but neither has yet finalised its rules. That creates a real window for the Taskforce to guide how the two frameworks can work together rather than grow apart. The GENIUS Act already anticipates reciprocal pathways, and the FCA has a long track record of constructive international cooperation.  A Taskforce-led effort to map out practical forms of deference once both regimes are live could prevent duplicative oversight, reduce friction for issuers, and give users greater confidence in the quality and safety of stablecoin rails across both markets. If the groundwork is laid now, those mechanisms could be activated from day one, rather than tackled years after the fact. The promise of the Taskforce lies less in grand announcements and more in whether it can stitch together practical, workable bridges between two ambitious but quickly evolving regimes. Expecting full harmonization would be naïve, but expecting meaningful transparency and collaboration is not. If the US and UK can use this moment to build trust, reduce avoidable divergence, and set a tone of openness to responsible innovation, the Taskforce could become more than a diplomatic gesture. It could be the start of a quieter but more lasting shift toward genuinely interoperable digital-asset markets. Let’s hope the next 180 days lay those foundations...

If the 20th century was about building highways for cars, the 21st is about building highways for money. After a long period of building foundations for institutional-grade capability, blockchain has finally reached a point of technological and business viability. In August, Wyoming flipped the switch on one of the first government-run lanes on the blockchain From Cattle to Code Wyoming has long been known for open plains and open skies — but now it’s pioneering open finance. In August 2025, the state launched the Wyoming Stable Token (FRNT - formerly WYST) on Avalanche, marking the first U.S. state-issued stablecoin fully backed by short-term Treasury bills and managed under a transparent, legally defined framework. Each FRNT token represents a digital dollar substitute:1 token = 1 US dollar, backed by state-managed reserves. Unlike privately issued stablecoins, FRNT isn’t a speculative instrument. It’s a public utility: programmable, auditable, and backed by the full credibility of the State of Wyoming. The logic is simple but revolutionary: if states are responsible for monetary integrity within their borders, why shouldn’t they participate in digital money issuance too? Compliance by Design For regulators, the most important story here isn’t the coin, but rather the architecture. The Avalanche network was selected not because it is the loudest or most popular chain, but for its modular performance characteristics and mature tooling.  In July 2025, Wyoming showcased instant vendor payments in a state pilot using Hashfire, an Avalanche-based platform that ties authenticated contracts to programmable payouts in FRNT, cutting payment timelines from weeks to seconds. A month later, the Wyoming Stable Token Commission announced the FRNT mainnet launch, with Avalanche among the supported networks and subsequent distribution expanding to seven blockchains.  Hashfire provides the contracting and payment automation layer while FRNT provides a state-issued, over-collateralized digital dollar that can move on public chains with auditability. Rather than relying on bespoke, closed rails, Wyoming anchored the token to public infrastructure and paired it with a workflow layer that enforces approvals and creates a tamper-evident audit trail.  Avalanche is an ideal platform for government payments due to its practical advantages: finality in seconds, low settlement costs, and an energy-efficient proof-of-stake design. Furthermore, its multi-chain issuance capability prevents vendor lock-in and fosters greater interoperability, making it suitable for production-grade use. The technology doesn’t evade regulation; it operationalizes it through transparent ledgers, rule-driven disbursements, and public reporting. And that’s a blueprint more states should be watching. The Wyoming Model Since 2019, Wyoming has passed more than 30 blockchain-related laws. It created Special Purpose Depository Institutions (SPDIs) to give digital-asset companies access to banking services, established legal definitions for digital property, and built a clear framework for stable token issuance through the Wyoming Stable Token Act. The FRNT project specifically is being led day-to-day by the Wyoming Stable Token Commission (WSTC), which was established more than two years ago through the Wyoming Stable Token Act. The state government is backing the WSTC with a budget of $5.8M. FRNT is the natural culmination of that work — the bridge between state treasuries and digital finance. The token is fully redeemable, transparently backed, and non-fractional. Monthly audits are mandated, the State Treasurer oversees issuance, and every FRNT transaction settles on chain, meaning jurisdiction and compliance are crystal clear. This alignment of law, technology, and finance is rare in the blockchain world. It shows that public institutions can innovate within existing statutes, rather than outside them. Why It Matters for Policymakers Federal and state agencies have spent years grappling with one fundamental question: How do we bring digital assets under the umbrella of the existing financial system?  Wyoming’s approach offers a live blueprint. By leveraging Avalanche’s L1 architecture, the state created a sovereign, rule-abiding financial system within a broader network. A sandbox where state and federal compliance can coexist with innovation. In a post-CBDC debate world, FRNT is a political middle ground. It avoids the surveillance fears tied to central bank digital currencies while delivering the efficiency gains of programmable money. It’s the regulatory equivalent of having your cake and auditing it too. Federal regulators can view it as a “federalist pilot.” A controlled, transparent testbed that respects both state sovereignty and national compliance frameworks. FRNT could eventually integrate with FedNow or Treasury-led payment rails, creating a unified but flexible model for digital government money. The Broader Policy Context Across the United States, momentum is building toward this vision, but progress remains uneven. Texas is investigating blockchain applications for land registries and oil royalty management. California’s Department of Financial Protection and Innovation has convened a Digital Financial Assets working group to study consumer protections and licensing frameworks. Florida has piloted blockchain programs for vehicle titles and state payments. Illinois has explored distributed ledgers for Medicaid record-keeping and benefits tracking. There are important steps; but so far, they’re isolated experiments. What Wyoming has accomplished with FRNT and Avalanche is not just another pilot, it is operationalization. It is the transition from theory to production, built on sound policy and proven infrastructure. FRNT is policy that works, and code that proves it. As the federal conversation evolves, three priorities will define the next stage of U.S. blockchain regulation: standardization, transparency, and sovereignty.  Standardization will ensure interoperability between public and private systems. Transparency will guarantee that citizens and regulators can verify how digital assets move, without compromising individual privacy. And sovereignty will allow states, agencies, and regulated enterprises to retain control over their infrastructure and data. AvaCloud’s model of sovereign, customizable Layer-1 blockchains aligns naturally with all three. Conclusion The FRNT model demonstrates that public institutions can issue stablecoins without handing over control to private companies, and that transparency can be built into the code, not just the oversight process. Also, FRNT shows that states can lead in digital transformation without waiting for Washington to act. FRNT moves money faster, while also moving public finance into the future. Wyoming didn’t just launch a stablecoin: it launched a model for digital statecraft.