Author | The Washington Post
Compilation | Wu Talks Blockchain
Original link:
https://www.washingtonpost.com/business/2024/11/11/trump-crypto-regulation-bitcoin/
President-elect Donald Trump is preparing the U.S. government to take a more accommodative stance toward cryptocurrencies, eyeing a slate of industry-friendly candidates for key positions while his top advisers discuss possible federal policy changes with cryptocurrency executives.
By seeking a lighter regulatory environment, Trump hopes to fulfill his campaign promise to make the United States the "cryptocurrency capital of the world" - a statement that has angered consumer regulators, won strong support from the industry and sent bitcoin prices soaring.
Early discussions have centered on a group of financial regulators, including the U.S. Securities and Exchange Commission. Trump aides are considering a number of current regulators, former federal officials and financial industry executives, many of whom have publicly expressed pro-cryptocurrency views, for key leadership positions, according to five people familiar with the matter. They requested anonymity to discuss the matter and cautioned that the process is still early and the list of candidates is constantly changing.
The appointments are crucial: Under Trump, the heads of the SEC and other agencies will have the power to decide whether cryptocurrencies become a larger, more formal part of the financial system. The choice has major implications for the global economy, and the stakes are high, as the 2022 collapse of crypto giant FTX and the resulting catastrophic contagion risks showed.
Those under consideration for the SEC and other posts include Daniel Gallagher, a former SEC official who now works for financial technology company Robinhood, which offers cryptocurrency wallets and stock trading services, and the agency’s two Republican commissioners, Hester Peirce and Mark Uyeda, according to people familiar with the matter.
Gallagher, a former Republican donor, has previously criticized the SEC for its "scorched earth policy" toward cryptocurrencies. Peirce and Uyeda have criticized their agencies' policies and enforcement actions under President Joe Biden. Peirce is considered a possible choice to serve as interim SEC chair after Trump takes over the White House, after which she may lead a federal crypto policy task force.
“The commission’s war on cryptocurrencies must end, including crypto enforcement actions based solely on unregistered entities with no allegations of fraud or harm,” Uyeda told Fox Business this month. “President Trump and the American electorate have sent a clear message. Beginning in 2025, the SEC’s role is to enforce that mandate.”
Trump aides have also been eyeing Paul Atkins, a former SEC commissioner who assisted with Trump’s last transition, and Chris Giancarlo, a former Commodity Futures Trading Commission commissioner, according to people familiar with the matter.
The SEC nominee will replace current chairman Gary Gensler, whom Trump promised to “fire” at a major Bitcoin conference this summer. Under Gensler, the SEC has aggressively cracked down on crypto companies, filing fraud charges against FTX’s leaders and a slew of allegations about business practices against another trading platform, Binance. The agency has also been fighting in court against two other crypto exchanges, Coinbase and Kraken, as well as Ripple, the company behind the XRP token, alleging they failed to comply with federal law requiring them to register their platforms or tokens — charges the companies deny.
“His days are numbered,” said Ripple CEO Brad Garlinghouse, adding that the company has been “in constant contact with the Trump transition team.” “I think it’s clear that this is an area they intend to continue to focus on. I think Trump and many others realize there are a range of new technologies that are likely to define the next few decades.”
Broadly, cryptocurrency advocates believe Gensler misguidedly expanded the law because of his personal antipathy toward digital assets — and they hope his successor will reverse some of the federal enforcement actions currently underway.But it’s unclear if Trump can or would actually fire the current SEC chairman, other than demoting him to commissioner while handing the agency over to a new leader.A full ouster of Gensler — a Senate-confirmed regulator — could set off a novel and complex legal battle over presidential power, some people familiar with the matter said.
For his part, Gensler has not said whether he will resign on his own if the administration changes, though senior SEC officials typically do so. A spokesman declined to comment.
“The American people overwhelmingly re-elected President Trump to deliver on his campaign promises," Trump transition spokeswoman Karoline Leavitt said in a statement. "He will deliver on his promises."
Whatever the outcome, the early signs point to a sea change in Washington’s attitude toward cryptocurrencies, a shift that highlights the industry’s rapid emergence as a major donor in U.S. politics — helping elect dozens of friendly members of Congress while heavily supporting Trump’s presidential campaign.
Industry executives said they are primarily seeking regulatory clarity since Congress has failed to pass a comprehensive law to govern their products and services — rules that would determine, for example, when cryptocurrencies are securities or currencies, what investor protections should apply and which agency would oversee the industry and its products.
“I think a lot of industries, a lot of companies say they want to be regulated, when their goal is really the opposite,” said Paul Grewal, chief legal officer at Coinbase. With cryptocurrencies, he said the situation is different: “There is specific legislation in Congress right now that we think will protect investors and, frankly, resolve some of the ambiguity.”
But the political offensive has unnerved some Democrats on Capitol Hill, who say legislative solutions backed by the crypto industry could actually leave millions of Americans without more protection — increasing the risk of loss and fraud while posing new threats to the financial system.
“This means people are more vulnerable to an industry that is rife with fraud, abuse, market manipulation and cyber breaches," said Patrick Woodall, policy director at Americans for Financial Reform, which advocates for stronger financial regulation. “This is an extremely volatile industry where people have suffered huge losses and where insider market manipulation is rife."
In an effort to win over the industry, Trump appeared at a national Bitcoin rally in Nashville in July and announced a pro-cryptocurrency agenda that he would push when he enters the Oval Office again. He pledged to advance crypto policy “written by people who love your industry” and predicted that Bitcoin would surge under his administration.
Trump’s unqualified support marks a marked shift from his first administration, when he dismissed cryptocurrencies as a “scam.” But eventually he embraced the industry as it gave him public praise and financial support, even helping him launch his own cryptocurrency project just weeks before winning the presidency. A number of cryptocurrency giants, including Kraken chief legal officer Marco Santori and David Bailey, who runs a cryptocurrency conference in Nashville, later attended Trump's election night party in Florida, according to two people familiar with the matter.
Bailey did not respond to a request for comment. Kraken declined to comment, as did Santori, one of the cryptocurrency executives being discussed for a possible role on Trump’s transition team.
In preparation for his return to the White House, Trump has surrounded himself with some notable cryptocurrency supporters, including Elon Musk, one of Trump’s closest tech allies and financiers, and Howard Lutnick, who has close ties to the troubled cryptocurrency Tether. Lutnick is co-chairing the presidential transition process, while Bailey, who helped Trump engage with the Bitcoin community, also remains actively involved.
Lutnick’s involvement, in particular, has raised concerns about potential conflicts of interest — since he’s helping to pick leaders for top federal posts that could directly impact his business as CEO of Wall Street firm Cantor Fitzgerald. Lutnick has publicly acknowledged, for example, that he manages “many, many assets” of Tether, a currency that is facing potential sanctions from the U.S. Treasury Department.
According to a person familiar with the crypto plans, Lutnick has made some outreach to the crypto industry along with other Trump aides, including Michael Kratsios, who previously served as White House chief technology officer. Officials have spoken with at least one major crypto company to discuss the possibility of joining the new presidential digital currency commission that Trump has promised to establish if elected.
Another person believes the incoming administration intends to appoint a top crypto adviser to the National Economic Council, a key policy arm of the White House. Beyond that, the administration must fill several key roles: In addition to the SEC, Trump must also select leaders for the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), all of which oversee certain elements of cryptocurrency, including its relationship to the banking system.
Some cryptocurrency executives said they have also discussed with Trump aides possible early executive orders or other presidential directives that could help the industry, such as by clarifying regulatory authority among federal agencies or conducting studies to figure out ways the government can further develop the crypto ecosystem. They likened it to a series of similar orders issued during Trump's first term that spelled out how the government regulates the financial system under the so-called Dodd-Frank Act.
Some of those conversations date back to the campaign, and it’s unclear whether Trump will act on them as he prepares to take office again. Many observers do expect him to follow through on his promise to create a national cryptocurrency reserve to prevent the U.S. government from selling bitcoin and other tokens it has seized in past criminal investigations.
"President Trump owns the House and the Senate. He has a mandate," Bailey said last week on X, even though a slew of House election results had not yet been called by the Associated Press as of Monday, leaving partisan control of that chamber unclear. "We have the environment to get this done in the first 100 days."
Appendix: Candidate Background Information
Candidates being considered for the SEC and other positions include:
1. Daniel Gallagher: A former SEC commissioner, he currently works for Robinhood, a fintech company, in charge of corporate regulation. Robinhood provides stock trading and cryptocurrency services, including cryptocurrency wallets.
2. Hester Peirce: The current Republican SEC commissioner is known as "Crypto Mom" for her pro-cryptocurrency stance. She has repeatedly criticized the SEC's overly strict cryptocurrency regulatory policies and advocated for a clearer regulatory framework to promote the development of the cryptocurrency industry.
3. Mark Uyeda: The current Republican commissioner of the SEC, he opposes the SEC's tough stance on the cryptocurrency industry and advocates ending enforcement actions requiring registration without allegations of fraud or harm. He has expressed support for the development of cryptocurrency on many occasions, believing that the SEC should provide space and clarity for innovation in the industry.
