Trump and the Crypto Industry: A Promising Shift?

By Hannah Lang

(Reuters) – At a bitcoin conference on Saturday, former U.S. president Donald Trump vowed that if reelected, he would terminate Securities and Exchange Commission (SEC) Chair Gary Gensler, known for his critical stance on cryptocurrencies. The crowd erupted in applause.

“Wow, I didn’t know he was that unpopular,” Trump remarked, resonating with his supporters.

Once skeptical of cryptocurrencies, referring to them as a “scam,” Trump is now courting the industry, capitalizing on major donations from those wanting an end to Gensler’s regulatory clampdown.

Under Gensler’s leadership, appointed by President Biden, the SEC has launched numerous enforcement actions against significant exchanges like Coinbase, Binance, and Kraken, leading to hefty fines.

A Trump victory could pivot the regulatory landscape overnight. He could appoint a crypto-friendly chair to advance agendas that include relaxing guidance restricting crypto custody options, establishing a safe harbor for new tokens, and withdrawing enforcement actions.

“The most important thing we want from a new administration is the appointment of individuals who have a grasp of crypto,” emphasized Kristin Smith, CEO of the Blockchain Association, an industry advocacy group.

Gensler’s office declined to comment.

Gensler maintains that most crypto tokens act like securities and should be regulated accordingly, a view supported by lower courts. Meanwhile, crypto firms argue tokens are commodities, seeking new laws that could clarify ambiguities, though such measures could take years amid legislative gridlock.

While Gensler’s term may last until 2026, Trump could appoint a new commissioner as acting chair, with Hester Peirce, a known advocate for cryptocurrencies, being a likely choice.

The industry is also championing crypto-friendly figures like Brian Brooks and Chris Giancarlo, both of whom served in Trump’s first administration, for the permanent role.

An acting chair could swiftly overturn 2022 SEC guidelines that obligate public companies to classify crypto assets held on behalf of others as liabilities due to their risk. Executives argue that easing these requirements would bolster consumer confidence in storing cryptocurrencies with reliable lenders.

“I believe that’ll be rescinded on Day One of a Trump administration,” remarked Cody Carbone, chief policy officer at the Chamber of Digital Commerce.

The industry is also advocating for a safe harbor from SEC registration rules regarding crypto token issuance and trading—a concept Peirce introduced in 2020.

“We need to find a practical way to ensure token offerings happen transparently while providing purchasers with essential information,” Peirce stated to Reuters via email.

Smith echoed the sentiment, saying such a framework would have profoundly positive implications.

Giancarlo, affectionately termed “Crypto Dad” during his tenure as CFTC chair, did not comment on his interest in the SEC chair position under a potential second term for Trump, but he reinforced the need for a balanced regulatory approach. He supports a pause on enforcement actions absent investor harm or fraud, advocating for a collaborative rule-writing process with Congress to grant innovators compliance time.

Trump’s campaign advisor Brian Hughes asserted that the former president aims to eliminate “obstacles and unnecessary burdens” hindering cryptocurrency.

Potential Political Challenges Ahead

However, the authority of a new chair may fluctuate based on the political balance of the five-member commission managing critical decisions on rules and enforcement. Currently dominated 3-2 by Gensler and two other Democrats critical of crypto, the weighing favoring Gensler poses challenges.

The president can replace the SEC chair with any commissioner, yet Gensler could remain in his role. Should he depart, remaining members would initially be evenly divided, limiting a new chair’s influence.

Peirce expressed that major changes to enforcement and safe harbor initiatives would likely require commission votes, possibly postponing approval until Republicans achieve the majority.

Giancarlo reiterated that he envisions a temporary suspension of enforcement actions where no investor harm or fraud exists, advocating that the agency should engage in rule-making in collaboration with Congress first to facilitate a conducive innovation environment.