Regulatory Challenges in the Cryptocurrency Sector and the 'Bad Actors' Issue
Outgoing SEC Chair Gary Gensler sharply criticized the cryptocurrency sector in a media interview, pointing out that it is filled with 'bad actors' and generally exhibits 'non-compliance' characteristics. Market sentiment plays an overly important role in this sector, often obscuring the actual state of fundamentals. Despite Bitcoin being the largest cryptocurrency, accounting for 60% to 80% of market value, the remaining 10,000 to 15,000 cryptocurrency projects also raise funds from the public, many of which ultimately struggle to survive, facing numerous 'pump and dump' schemes and other issues.
During his tenure, Gensler continued the work of his predecessor Jay Clayton in regulating cryptocurrencies and achieved certain results. He revealed that the SEC has brought about 100 enforcement actions in the cryptocurrency sector over the past four years, accounting for 5% of its total enforcement work. Nevertheless, Gensler believes that there is still much work to be done in regulating the cryptocurrency sector.
Trump's team is reshaping the leadership of the Federal Reserve: Bowman may be promoted to Vice Chair of Financial Regulation.
Meanwhile, the Trump team is actively considering how to reshape the leadership of the Federal Reserve. Insiders reveal that Trump's advisors are contemplating promoting Federal Reserve Governor Bowman to serve as the Vice Chair responsible for financial regulation. This move reflects Trump's recognition of Bowman and his new ideas in financial regulation.
Trump's advisors have begun drafting a list of potential successors to Federal Reserve Chair Powell, who will step down in May 2026. They are primarily focusing on the comments from current Federal Reserve officials regarding interest rates to determine the suitability of candidates for the next central bank leader. Potential candidates include Hassett, who will soon serve as the Director of the White House Council of Economic Advisers, former Bush administration officials Lindsey and Summerlin, former World Bank President Malpass, former Federal Reserve official Walsh, as well as Federal Reserve Governors Bowman and Waller.
However, Waller, who was appointed to the Federal Reserve Board during Trump's first presidential term, was once seen as a potential candidate for Federal Reserve Chair. But after supporting a 50 basis point rate cut last September, his 'advantage' clearly diminished. Trump expressed dissatisfaction, believing this move was a political maneuver aimed at keeping someone in office.
Bowman was nominated by Trump in 2018 as a community banking expert. She is known for her hawkish views on inflation and has strongly opposed Barr's reform proposal to increase capital for large banks. She also criticized how the Federal Reserve handled the bankruptcies of several banks, including Silicon Valley Bank, in 2023, and became the first Federal Reserve Governor to cast a dissenting vote in the FOMC in nineteen years last September. These views seem to align with Trump's criticism of significant interest rate cuts before the election.
Composition and Responsibilities of the Federal Reserve System and Its Leadership
The Federal Reserve system was established by the U.S. Congress in 1913, consisting of the Federal Reserve Board located in Washington, D.C., 12 regional Federal Reserve Banks across the country, and the Federal Open Market Committee (FOMC) responsible for interest rate policy. The Federal Reserve Board has seven members, including a Chair, two Vice Chairs (one responsible for monetary policy and one for bank supervision), and four Governors. All members are nominated by the President of the United States but must be confirmed by the United States Senate.
During Trump's first presidential term, he successfully nominated and appointed Bowman and Waller to the Federal Reserve Board and promoted Powell, who was appointed by Obama, to serve as the Federal Reserve Chair. After winning the election last year, Trump reiterated his desire for greater influence over Federal Reserve policy but stated he would not ask Powell to step down.
Crypto-Friendly Candidates Compete for CFTC Chair Position: Potential Changes in the Regulatory Environment
In the cryptocurrency sector, Trump's transition team is seeking candidates friendly to cryptocurrencies to serve as the next Chair of the Commodity Futures Trading Commission (CFTC). Competing for this position are current CFTC Commissioner Summer Mersinger, a16z crypto policy chief and former CFTC Commissioner Brian Quintenz, and Kraken's Chief Legal Officer Marco Santori.
According to insiders, Quintenz and Mersinger are 'popular candidates' for the position. They possess extensive experience and qualifications in crypto policy and have significant influence in the industry. Mersinger is regarded as a thought leader at the intersection of crypto innovation and consumer protection, advocating for balanced regulation to promote the industry's growth. Meanwhile, Quintenz has honed a crypto-friendly stance during his tenure as a CFTC Commissioner and in his current role at a16z.
Although Quintenz and Mersinger are leading, several other candidates remain on the shortlist, including Republican CFTC Commissioner Caroline Pham, who has a strong regulatory background, and Neal Kumar and Josh Sterling, who previously held senior positions at CFTC and are regarded as regulatory experts. Trump's transition team has reviewed at least six candidates for the position, reflecting the administration's focus on finding a leader who aligns with its vision for the cryptocurrency industry.
The Future of the Industry Under Regulatory Reshaping
In summary, both the cryptocurrency sector and the Federal Reserve system face challenges of regulatory reshaping. SEC Chair Gary Gensler's criticisms of the cryptocurrency sector, along with Trump's team's adjustments to the leadership of the Federal Reserve and CFTC, indicate potential changes in the future regulatory environment. For the cryptocurrency industry, maintaining compliance and innovation in the context of tightening regulation will be a significant issue. For the Federal Reserve, how to cooperate with the Republican Party on regulation while maintaining the independence of monetary policy will also be a topic worth paying attention to.