Donald Trump’s back on top – and that means the sky’s the limit for crypto, right? Well… not quite.
Trump’s big promise to make the US the crypto capital of the world is, well, a BIG promise.
Yes, he’s hiring the right people and making the right noises. The sense that the US government is engaged in some kind of war on crypto is receding, but insiders tell MONIIFY Trump has a lot of roadblocks to overcome to make good on his crypto-friendly pledges. So put down the bubbly, stop obsessing over BTC’s latest blip, and let’s take a sober look at where the situation really stands.
Can he deliver?
There’s no greater indicator of the crypto world’s confidence in Trump than Bitcoin’s historic charge to nearly $100k since his election win. It’s dipped to $93k this week because the HODLers have decided it’s time to make bank. But the consensus is this rally is not done.
Read more: BTC’s $100k dream delayed as HODLers cash out big – MONIIFY
“Bitcoin will exceed $100K within 12 months,” says Carlos E Duque, general counsel at blockchain company Wire Network.
That optimism comes despite the widespread perception that Trump’s volatile and unpredictable. Remember, he was against crypto initially.
But those on the Trump train argue that, with the experience of a prior term in office, this version of The Donald will be different.
He’s tapped crypto-friendly figures for key appointments like Treasury Secretary and Commerce Secretary. He’s considering creating a position to oversee crypto at the White House, and has met with industry bigwigs, as lobbying for positions on his promised crypto council picks up.
And now that Securities and Exchange Commission chair Gary Gensler – an archvillain in the eyes of the crypto world – has said he’ll step aside, the road is clear for Trump to appoint a replacement to champion the industry.
So hopes are high that with Trump in office, the global crypto race could be accelerated.
“Bitcoin’s rise and Ethereum’s innovation suggest we may be entering a golden age for crypto,” says Livio Weng, CEO of Hong Kong-based Hashkey Exchange.
Read more: How Trump could change the crypto world – MONIIFY
Making the rules
So that’s the easy part. Now to the hard bit. The main challenge facing Trump is sorting out the regulation around crypto.
Despite repeated attempts, US politicians have so far failed to pass laws that would give the industry clear rules. Into that vacuum have stepped agencies like the SEC, which has decided to enforce the rules of TradFi on… DeFi.
This approach – termed “regulation by enforcement” – has choked the industry, leading to charges against some companies, and driving others to take legal action against the government, or pull out of the US altogether.
But making laws, especially for a fast-evolving sector like crypto, is far from straightforward. And while Trump might have the loudest voice in the conversation, he won’t automatically get what he wants.
One potential route, is that once Gensler leaves in late January, the government decides the US essentially doesn’t need any specific crypto laws.
“That simple change could largely deregulate crypto,” says Martin Auerbach, a former US Department of Justice lawyer, and Head of US White Collar Defense and Investigations at law firm Withersworldwide.
But that’s just one possibility – and Trump has made a bunch of promises around crypto that will require real changes to be made. Exactly how these might play out depends on a number of factors.
How much of a priority is crypto?
Firstly, other priorities are likely to come before crypto on Trump’s to-do list.
“Nothing in Washington is guaranteed,” says Patrick Daugherty, head of digital assets for US law firm Foley & Lardner.
“There could be disagreement among Republicans over which bill will become law,” and other developments could end up taking precedence. “Trouble in the Mideast, for example, or the outbreak of another war.”
However, given the complexity of solving many other issues (hello, Middle East)…. fixing crypto could actually stand out as a quick win.
“Crypto regulation may actually be one of the easier paths,” says New York based Greg Johnson, co-founder of the investment solution provider Rubicon.
Bipartisan support still matters
Even though Republicans have a majority in the 100-seat Senate, with 53 senators, most bills need to get 60 votes to avoid a filibuster. That’s a process that can allow the minority to block laws.
That’s not necessarily fatal, says Daniel Stabile, co-chair of the digital assets group at international law firm Winston & Strawn.
Under a so-called “reconciliation” process, bills relating to tax and spending could be passed with a simple majority. Advocates for the crypto industry were “actively looking to see what components can be passed through that process.”
On top of that, the crypto industry might have spent enough – as the biggest political donor of this election cycle – to win friends on both sides of the aisle, potentially securing support from Democrats for pro-crypto bills.
“I suspect that the administration can get to 60 votes, if necessary,” says the ex-SEC lawyer Daugherty.
That kind of bipartisan support would be required to pass key laws that could be game changers for crypto.
- The Financial Innovation and Technology for the 21st Century Act. This bill clears up the debate over what makes a crypto token a security or a commodity. Lots of crypto companies have been snarled up in this legal grey area.
- The “Clarity for Payment Stablecoins Act of 2023,” which is the bill that could define how stablecoins operate in the US.
- The Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide (“BITCOIN”) Act which would allow for the creation of a strategic Bitcoin reserve in the US, one of Trump’s key crypto promises.
No precedent
A big part of the challenge around enacting Trump’s crypto policies is that this is uncharted territory, which means the process isn’t clear.
Let’s take the promise to set up a Bitcoin reserve, which would hold the 208,109 Bitcoins – worth over $19 billion – currently in the government’s possession and prevent it from being sold off.
Experts say it’s not clear whether this would require approval from Congress or could be done on the basis of Trump’s executive power alone.
The latter approach would “draw a chorus of protest,” says US-based Greg Johnson, co-founder of investment solution provider Rubicon.
How quickly will things move?
The signs are that Trump wants to move quickly. But the window given to agencies like the SEC and Treasury to review and comment on new rules means there would be at least a year before any changes are felt on the ground, says Johnson.
The mid-term elections in two years add to the time pressure, as they’d give the Democrats an opportunity to win back either of the two houses in Congress.
There’s also a risk that if Trump rushes the crypto rules, they’ll end up being incomplete or inefficient and lead to a barrage of legal challenges. Not good.
“The fact that the Senate will have to work across the aisle to get most legislation done will bring some checks and balances to the system,” says Kim Prior, co-chair of the digital assets group at law firm Winston & Strawn. “Most in the industry do not want a weak or half-baked legal framework.”
However long the new laws take to pass, most experts reckon the SEC and other agencies would drop legal actions against crypto companies or invite them to settle.
Duque, Wire Network’s general counsel, doesn’t think crypto rules will be much clearer under Trump, but that enforcement against firms will “fall through the floor.” With the threat of lawsuits all but gone, “the industry will be allowed to thrive even in an unregulated space,” he predicts.
This alone could be enough to unleash the crypto sector.
(Updates Auerbach quote to reflect potential role of CFTC)
