What lies ahead for crypto regulation in the US?
In Davos, US President Donald Trump asserted that the US is poised to be the Crypto Capital of the world, a declaration made during a virtual address to delegates. Subsequently, the White House published the long-awaited executive order on digital assets. Since securing victory in the election, the Trump administration has been signaling its intentions by appointing David Sacks as the White House’s crypto and artificial intelligence (AI) czar. Critics of the Biden administration highlighted concerns over the lack of regulatory clarity in the crypto industry and the Securities and Exchange Commission’s (SEC) enforcement practices. In response, the Trump administration aims to bridge the regulatory gap and accelerate deregulation in the innovation sector early in Trump’s presidency.
The current administration benefits from a favorable political landscape for the crypto industry, with key figures such as Representative French Hill leading the House Financial Services Committee and Senator Cynthia Lummis appointed as chair of the Senate Banking Committee’s digital assets subcommittee. Moreover, Paul Atkins, the selected chair of the SEC, along with advisors like Elon Musk and commerce secretary nominee Howard Lutnick, add weight to the administration’s crypto-forward agenda. As confidence grows in this agenda, expectations for regulatory changes in the industry are higher than ever.
A central concern in the ongoing discussions is the debate over whether the SEC or the Commodity Futures Trading Commission (CFTC) should oversee crypto regulation. This challenge has been a longstanding issue in Washington, centering on the classification of crypto as a security or a commodity. While under the previous SEC chair, Gary Gensler, crypto companies faced sanctions for securities law violations, leading to a preference among some legislators and industry experts for the CFTC as the regulator. Numerous bills in Congress, including the Financial Innovation and Technology for the 21st Century Act, address the jurisdictional questions between the SEC and the CFTC for crypto regulation.
An essential pledge from the Trump campaign to the industry was an end to regulation through enforcement. The appointment of Paul Atkins, who is perceived as crypto-friendly, signifies a shift towards a more favorable regulatory environment. Consequently, Atkins is expected to clarify the SEC’s authority over the crypto market and enforce regulations on crypto-assets, including their issuance and use within the US economy. Congress is also anticipated to play a significant role in reshaping the SEC and CFTC’s jurisdiction and enforcement capabilities through upcoming legislative initiatives.
Another critical topic of discussion revolves around stablecoins, which have amassed over $190 billion in global circulation. Stablecoins serve as a crucial source of liquidity for the crypto market, facilitating transactions between crypto and non-crypto assets. Amid their rising prominence, stablecoins play a role in addressing humanitarian needs and cross-border payments, including use in Ukraine as a means of remittances. A significant portion of stablecoins worldwide are pegged to the dollar, with a substantial portion of transactions taking place internationally. As legislation in Europe, Asia, and Africa sets the regulatory framework for stablecoins, the US is prompted to reflect on pending stablecoin bills in Congress, namely the Clarity for Payment Stablecoins Act and the Lummis-Gillibrand Payment Stablecoins Act. The Clarity Act has been under consideration by the House Financial Services Committee for the past year, nearing bipartisan consensus in multiple instances. This bill highlights the evolution and importance of stablecoin regulation within the broader framework of financial stability and international economic transactions.
