Trump’s Win Promises New Playing Field for Crypto

Dogged by its reputation as a financial refuge for off-the-books transactions and shady business, is cryptocurrency finally going legit?

The head of the Securities and Exchange Commission during President-elect Donald J. Trump’s first term in the White House thinks so. Former SEC chair Jay Clayton is predicting a Republican-controlled Congress will push through legislation to govern crypto. If true, it would represent a significant return on the industry’s massive investment in the 2024 election cycle.

While talk of issues like inflation and immigration dominated the public’s attention in the 2024 presidential matchup between Trump and Democratic Vice President Kamala Harris, an analysis by campaign spending watchdog OpenSecrets found the crypto industry funneled more than $130 million into election spending via three political action committees. The pro-crypto super PACs received more than $90 million alone from three of the sector’s major exchanges – Coinbase, Ripple and Jump Crypto – according to OpenSecrets, and most of their spending was aimed at either supporting GOP candidates or defeating Democrats.

For his part, Trump positioned himself as the crypto candidate – he even started his own crypto project, World Liberty Financial, this year. Among his promises out on the trail, Trump vowed to fire the SEC chair installed by President Joe Biden, Gary Gensler, on his first day in office. (Gensler announced last week he intends to step down from his position as soon as Trump takes office in January.) In a memo to clients on the outlook for crypto policy under the Trump administration, lawyers from Brownstein Hyatt Farber Schreck LLP pointed out that “enforcement actions carried out by the commission have presented perhaps the largest regulatory burden faced by the digital asset industry.”

So, at minimum, we can expect less aggressive enforcement against the crypto industry as a matter of practice after Trump takes office in January. But what about actual policy?

From the regulatory perspective, the SEC will presumably disavow its current position that digital tokens qualify as securities. Republican-appointed SEC Commissioner Hester Peirce has proposed an alternative approach that seems likely to gain traction. Her solution calls for granting a three-year safe harbor to purveyors to sell digital tokens without facing penalties.

On the legislative front, one bill currently circulating in Congress seems to foreshadow what is in store for the crypto sector. The Financial Innovation and Technology for the 21st Century Act (H.R.4763), which is commonly known as the FIT 21 Act, lays out a series of crypto rulemakings for both the SEC and Commodity Futures Trading Commission. Importantly, the legislation would give the CFTC control of regulating crypto spot markets.

And what role might Clayton play in the future of the crypto industry? Trump has nominated him to serve as U.S. attorney for the Southern District of New York. That’s the district that generally takes on legal cases involving digital assets.

In other words, there’s a new cop on the blockchain.

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The Intelligize blog is on hiatus for the Thanksgiving holiday and will return on Tuesday, December 3, 2024.