First look at crypto under the current administration

Following the transition of power on January 20, President Donald Trump’s view of cryptocurrencies has garnered significant attention. President Trump had campaigned on a commitment to support cryptocurrency, and even demonstrated his dedication to digital currency by launching a Meme coin shortly before his inauguration. And while this action prompted political and ethical inquiries, it reinforced his campaign promise.

Further affirming this promise, Trump issued an Executive Order to establish a cryptocurrency working group, which was tasked with proposing new regulations for digital assets and exploring the creation of a national cryptocurrency reserve, thereby continuing the pledge to swiftly reform the country’s cryptocurrency policy.

As a part of the new administration, Mark Uyeda, the new Acting Chair of the U.S. Securities and Exchange Commission (SEC), announced plans to launch a crypto task force to develop a comprehensive and clear regulatory framework. The primary objective of the task force will be to assist the Commission in establishing clear regulatory boundaries, providing realistic paths to registration, crafting sensible disclosure frameworks, and deploying enforcement resources judiciously. The overarching goal is to transition from what has been termed regulation by enforcement to a more structured regulatory approach.

What will be the regulatory approach?

Looking forward, it will be necessary to establish a regulatory framework for cryptocurrencies that could be similar to that of the banking industry. It is probable that the SEC, as opposed to the Commodity Futures Trading Commission, will emerge as the final regulator for this sector. Such a regulatory structure would offer the advantage of clearly defining the role and significance of cryptocurrencies both within the United States and outwardly in other global economies.

Recently, the SEC’s Division of Enforcement’s own Crypto Assets & Cyber Unit has been rebranded as its Cyber & Emerging Technologies Unit, with the aim of this rebranding seemingly focused more on fraud and retail use. This change continues with the SEC’s overall theme of inserting regulation early in the process rather than doing so by enforcement actions.

The current administration’s dynamic stance on cryptocurrencies signals a pivotal shift in the regulatory landscape. From President Trump’s assertive moves to establish a cryptocurrency-friendly environment to the proactive measures by the SEC and the U.S. Senate Banking Committee, it is evident that cryptocurrency is poised to become a fundamental component of the financial system. However, the juxtaposition of regulatory clarity and the inherent risks of digital assets necessitates a balanced and thoughtful approach. As we advance, it is imperative to construct a robust framework that fosters innovation while safeguarding the integrity and security of the nation’s financial ecosystem.

Sen. Tim Scott (R-SC), Chairman of the Banking Committee, delivered the opening remarks for the Committee’s hearing on Investigating the Real Impacts of Debanking in America. In his address, Scott emphasized that the use of cryptocurrency and other digital assets in banking is fundamental to participating in a free and fair society. This suggests an intention to limit financial institutions’ ability to de-bank or de-risk based on digital currency usage.

While this notion appears advantageous, it raises several concerns regarding the future of cryptocurrency. Additionally, there was minimal discussion on the use of cryptocurrencies in illegal activities and the associated risks. As a former chief of the SEC’s Office of Internet Enforcement once noted: “Every single crime you can conceive of is easier to do now because of crypto.” Thus, it would seem imprudent to proceed with improperly regulated cryptocurrency while simultaneously attempting to de-risk it.

Is crypto the future?

The indication is clear that decentralized finance, particularly cryptocurrencies, will be a significant trend in the future. In this context, it is essential to acknowledge that the US will play a crucial role in establishing a regulatory framework around this asset. Given the stance of the current administration, a comprehensive reassessment of the previous regime’s actions is necessary to ensure an optimal position for implementing regulations.

A hint of foreshadowing can be observed in the joint submission of a request to a federal judge — submitted by the SEC and Binance, the largest cryptocurrency exchange in terms of daily trading volume — to stay the regulator’s lawsuit against the cryptocurrency exchange. While, this joint filing references the potential influence of the recently established SEC task force, it also underscores a shift in the economic sphere, shown by the judge granting a 60-day stay in the lawsuit. Indeed, it is likely that there will be a change in regulation significant enough to settle this lawsuit within the 60-day stay that the court has granted.

Conclusion

It is clear that the current administration has decided to set itself apart from prior administrations in many ways, and crypto regulation is a very visible way to show the difference. Congress and the SEC along with other actors are poised to make crypto a fundamental part of the US financial system. In the not-so-distant future, the impacts of these new changes will become more apparent.

Nonetheless, the juxtaposition of regulatory clarity with the inherent risks associated with digital assets warrants a balanced and prudent approach. Moving forward, it is essential to develop a comprehensive framework that promotes innovation while ensuring the integrity and security of the financial ecosystem.