Proposed Changes in U.S. Cryptocurrency Regulation by Trump Administration
The Trump Administration is set to introduce significant alterations that could transform the cryptocurrency environment in the United States. President Donald J. Trump’s perspective on cryptocurrencies has notably shifted since his initial term. Back in 2019, he expressed doubts about digital currencies, but by June 2024, he attended a Bitcoin conference where he declared his ambition to establish the U.S. as the “crypto capital of the planet.” During this event, he committed to building up a stockpile of cryptocurrencies within the country and announced plans to ensure all cryptocurrency mining occurs on American soil, along with a promise to dismiss Gary Gensler, the then Chair of the U.S. Securities and Exchange Commission (SEC).
Market Dynamics and Potential Regulatory Shifts
Currently, the total market capitalization of all cryptocurrencies surpasses $1 trillion, with Bitcoin’s value experiencing a 40% surge since Trump’s election. Given the growing influence and acceptance of cryptocurrencies globally, it is essential to consider the possible legal and regulatory transformations that could emerge under a second Trump Administration. Trump has pledged to replace Gensler “on day one,” and it is anticipated that Gensler will step down on January 20, 2025. His tenure has been marked by a strong focus on enforcement actions against fraud and violations of securities laws, targeting both large cryptocurrency firms and high-profile individuals.
New Leadership at the SEC and Enforcement Changes
On January 7, 2025, Trump nominated Paul Atkins to lead the SEC. Atkins previously served as a commissioner from 2002 to 2008, where he was known for opposing enforcement actions. Currently, he is the CEO of Patomak Global Partners, a consulting firm that advises various cryptocurrency companies. Under Atkins, the SEC has already shown signs of moving away from an enforcement-heavy regulatory approach. On February 10, the SEC sought a 60-day pause in its litigation against Binance, suggesting a potential resolution, followed by a 28-day pause in its case against Coinbase on February 14. The SEC cited ongoing reviews of crypto-related matters as the reason for this additional time.
Classification of Digital Assets and Regulatory Clarity
One of the pivotal regulatory changes anticipated under the current administration is a reevaluation of how digital assets are classified. Gensler maintained that the majority of digital assets are securities, while the U.S. Commodity Futures Trading Commission (CFTC) has classified several cryptocurrencies, including Bitcoin, as commodities. This classification is fundamental because if cryptocurrencies are deemed securities, they would face stricter regulations and limited access to the financial sector. The Trump Administration appears to be in favor of the CFTC’s stance, which could lead to an expansion of its authority over digital assets while diminishing the SEC’s regulatory role.
Leadership Changes at the CFTC and Support for Cryptocurrencies
On February 13, 2025, Trump nominated Brian Quintenz to chair the CFTC. Quintenz, who served as a commissioner from 2017 to 2021, is a strong proponent of cryptocurrencies and previously held a position as head of policy for a cryptocurrency venture capital fund. The tax implications for cryptocurrencies have also garnered attention, with some advocates calling for the reduction or elimination of capital gains taxes on these digital assets to stimulate investment and usage.
Regulatory Initiatives for DeFi and Innovation
In response to the regulatory ambiguity surrounding Decentralized Finance (DeFi) platforms, which utilize blockchain technology for peer-to-peer financial transactions, regulators and lawmakers have initiated efforts to establish clearer guidelines. President Trump’s executive order to create a “Presidential Working Group on Digital Asset Markets,” along with the SEC’s initiative for a comprehensive regulatory framework, reflects this need for clarity. Such measures may enhance innovation by alleviating regulatory burdens on emerging companies uncertain about their legal responsibilities.
Balancing Privacy and Regulatory Oversight
The decentralized characteristic of numerous digital assets raises concerns regarding the traceability of illegal transactions. However, rigorous anti-money laundering regulations might also impede the broader acceptance of these digital currencies. The Trump Administration may seek to recalibrate the balance between privacy rights and anti-money laundering regulations, potentially revising existing rules to foster cryptocurrency adoption while addressing illicit activities.
Opposition to Central Bank Digital Currency and Support for Stablecoins
President Trump has expressed his opposition to the establishment of a U.S. central bank digital currency, asserting that he “will never allow” such a development. Nevertheless, he has shown support for the “safe and responsible expansion of stablecoins,” advocating for regulatory clarity to enhance their safety and usability. Stablecoins, which are often pegged to the U.S. dollar, tend to be more stable and are viewed as potential mainstream mediums of exchange.
Trump’s Vision for U.S. Cryptocurrency Mining
In his ambition to position the United States as the “crypto capital of the planet,” Trump has committed to ensuring that all remaining Bitcoin is “made in the U.S.A.,” emphasizing his desire for domestic mining operations. As it stands, approximately 37% of Bitcoin mining occurs in the United States, while 21% takes place in China, despite the latter’s ban on Bitcoin mining since 2021. Trump’s aspirations are closely linked to energy policy, as he seeks to establish U.S. energy dominance. This may lead to incentives for energy use or reduced regulatory barriers for energy infrastructure.
Proposals for a U.S. Bitcoin Reserve
Additionally, several leaders in the cryptocurrency market are advocating for the establishment of a U.S. Bitcoin reserve. On July 31, 2024, Senator Cynthia Lummis (R-Wyo.) introduced the Bitcoin Act of 2024, which aims to create a strategic reserve of Bitcoin, akin to the national petroleum reserve, by committing the U.S. government to acquire one million Bitcoins—roughly 5% of the total circulating supply—over a five-year period.
Implications of Proposed Changes for the Cryptocurrency Landscape
The proposed alterations by the Trump Administration could fundamentally reshape the cryptocurrency landscape in the U.S. A more transparent regulatory framework that diminishes litigation risks, combined with economic incentives for digital assets via tax or energy policies, and direct government acquisition of digital assets, could lead to greater adoption and innovation in blockchain technologies. Heightened regulatory oversight might mitigate risks for both cryptocurrency firms—reducing their fear of enforcement actions—and investors. This shift could also encourage institutional acceptance of cryptocurrencies in the financial sector, potentially prompting banks and hedge funds to develop their own digital assets, thereby broadening access to a wider audience.
Return of Talent to U.S. Cryptocurrency Development
In recent years, numerous digital asset firms have departed the United States, driven by a perception of an unwelcoming regulatory environment, resulting in a talent drain abroad. A regulatory shift, coupled with the broader change in government perspective that the Trump Administration represents, could incentivize American professionals to return and advance blockchain technology within the United States.
