On Donald Trump’s second day in office, cryptocurrency investors were buoyed by the announcement of a new Securities and Exchange Commission (SEC) cryptocurrency task force.
Trump returning to office coincided with the Bitcoin price hitting a record high of over $109,000. Last year Trump spoke at bitcoin’s biggest conference in Nashville, telling supporters, “Never sell your bitcoin”.
Since, he’s made several promises, including firing SEC Chair Gary Gensler, who ended up announcing in November that he would resign. Gensler stepped down when Trump was sworn in in January. Trump’s choice to replace him is a lawyer, Paul Atkins.
What will the cryptocurrency task force do?
The aim of the task force, in the words of the SEC, is to assist in drawing “clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously”.
Citi analysts have predicted less crypto regulation under Trump, with a move toward a “more legislative-based approach”.
After the SEC’s crypto crackdown under Joe Biden, Trump has positioned himself as a pro-crypto president.
Has Paul Atkins started work?
Atkins is yet to be confirmed by the Senate, as of 22 January. Trump named Mark Uyeda, SEC Commissioner, as acting chair.
Atkins started his career as a lawyer with Davis Polk & Wardwell, and is known as an advocate for reduced regulation and a promoter of financial innovation.
Overhauling crypto policy
The announcement of the task force was described by Reuters as “the first major move” in overhauling crypto policy.
Biden’s SEC sued crypto companies including Coinbase and Kraken, arguing they had broken SEC rules. The companies denied the allegations and argued the SEC rules aren’t appropriate for crypto “and that it is unclear when a crypto token might qualify as a security and therefore be subject to the SEC’s oversight” (as per Reuters).
Reuters reported earlier in January that Uyeda and fellow commissioner Hester Peirce were considering new guidance. They were expected to ask for industry and public feedback.
What was Gensler worried about?
Gensler’s SEC started over 80 crypto-related enforcement actions. The SEC argued crypto tokens acted as securities and cryptocurrencies should comply with their rules. Certain cases alleged fraud.
Many defendants argue that cryptocurrencies are more commodities than securities.
When are the new SEC guidelines likely to be agreed?
New crypto regulations could take several months. So too could resolving the enforcement actions.
Philip Moustakis, a former SEC attorney, has said that dismissing dozens of enforcement actions would be an unprecedented move and may set a risky precedent.
Robert Cohen, previously of the SEC’s enforcement division, said one option may be to restart settlement negotiations. The new SEC leadership, he said, would likely be tough on fraud. “I think the industry wants to see fraudsters or wrongdoers held accountable”.
Does the crypto industry support the task force?
The crypto industry is optimistic with the news of the new task force. Coinbase CEO Brian Armstrong has said Trump “really wants to be the first bitcoin president”.
David Hollerith, senior reporter at Yahoo Finance, has said the industry views Atkins’s appointment, as well as that of David Sacks as an AI and crypto czar, as “good signs”.
Trump’s second presidency may not result in a booming economy, though. Harvard economist Ken Rogoff told Yahoo, “I don’t think we’re going to see the boom that we saw in the first time”.
Will the boost for crypto continue?
Bitcoin and Solana hitting record highs is a good sign, but the crypto industry is famously volatile. It’s too early in Trump’s second term to say how his administration will affect crypto in the long term.
Solana’s price has increased by 170% over the last 12 months. Alex Carchidi recently wrote for The Motley Fool that investors viewed Solana as a potential hub “for artificial intelligence coins, meme coins, decentralized finance, art instantiated as non-fungible tokens, and other projects.”
The SEC will decide whether or not to approve a Solana ETF by March. There’s optimism among crypto supporters that it will be approved given Trump’s election.
The mood around Ethereum is more pessimistic. Carchidi writes that despite growth of 28% over the last 12 months, “consistent inflows to the chain have been lacking.” An Ethereum ETF was approved last year. Many investors swapped Ethereum for Solana, but the former is still the second-largest cryptocurrency.
On January 18, the Ethereum Foundation, which governs the chain, announced changes in its leadership. It is aiming to “shore up its technical chops and its integration with the chain’s project ecosystem,” reports Carchidi. (It should be noted that Carchidi has positions in Ethereum and Solana, as noted by The Motley Fool.)
Solana didn’t make The Motley Fool’s “10 best stocks” for investors to buy.
The wider business world may have more cause for optimism. Brian Sozzi and Jennifer Schonberger, writing for Yahoo Finance, described bank executives as “exuberant” after Trump’s “historic waves of executive orders.”
Mary Callahan, head of asset and wealth management at JPMorgan, said Trump’s policies were creating a “very pro-business environment”.
Brian Moynihan, CEO of Bank of America, was also optimistic on financial regulation and crypto. He said Trump’s presidency is “great news” for small and midsize businesses.
