Unlocking Crypto’s Future: How a Trump Administration Could Shift the Game

Crypto enthusiasts have a reason to pop the champagne corks following President-elect Donald Trump’s triumphant return to the political arena!

In a thrilling twist of fate, Bitcoin has surged past the $100,000 mark for the second time ever, just days after hitting this impressive milestone in early December. This meteoric rise, driven by a wave of optimism surrounding a more crypto-friendly Trump administration, has ignited the market!

“As election day drew closer, it became evident that a Trump administration would create a more favorable regulatory landscape for crypto,” noted Eswar Prasad, a trade policy professor at Cornell University.

READ MORE: Bitcoin reaches unprecedented heights, bouncing back remarkably after the FTX debacle.

In the thrilling hours following Election Day, Bitcoin’s value skyrocketed by 8%. Even Dogecoin—a crypto that enjoys a cult following thanks to Trump supporter Elon Musk—spiked by over 18%!

With crypto advocates stepping into key positions within the incoming administration, Prasad declared, “It’s clear we’re entering a phase where any regulatory framework concerning cryptocurrencies will be tremendously favorable for the industry.” This shift is “supercharging” cryptocurrencies as valuable financial assets!

Recently, Trump tapped crypto champion Paul Atkins as his choice for chair of the Securities and Exchange Commission (SEC) and introduced former PayPal executive David Sacks as the newly appointed AI and crypto czar. These appointments signal a major pivot in American policy towards boosting cryptocurrencies!

Once a skeptic of the crypto world, Trump declared back in June that he aims to transform the United States into the “crypto capital of the planet.” He has advocated for creating a U.S. “strategic reserve” of Bitcoin. During a keynote speech at a bitcoin conference in Nashville last July, he promised that crypto regulations would be crafted by “those who genuinely love” the industry. His campaign even began accepting donations in crypto, showcasing the growing integration of digital currency into mainstream politics. Trump and his family are also backing their own crypto initiative, World Liberty Financial, which recently attracted a hefty $30 million investment from crypto mogul Justin Sun.

“We’re optimistic that a Trump administration coupled with a pro-crypto Congress will help lay the foundation for effective regulations in the crypto markets,” said Faryar Shirzad, chief policy officer at Coinbase, a leading cryptocurrency exchange.

Shirzad expressed that Trump’s victory, especially as a candidate embracing the cryptocurrency sector, is a significant win for advocates across the board.

For the uninitiated, cryptocurrency represents a revolutionary form of digital currency, designed for seamless internet transactions without direct tie-ins to any government or financial institution. Bitcoin, the trailblazer of this digital frontier, was birthed in 2009. Although it has garnered attention and traction over the past decade, many Americans still view it with skepticism as a reliable investment.

Initially, cryptocurrency was hailed for its potential to provide privacy and a currency alternative beyond the grasp of national governments and conventional financial systems. This anonymity attracted both legitimate users and criminal enterprises alike.

Today, the majority of crypto enthusiasts engage with it not as a currency for daily purchases, but primarily as an investment. Critics, however, liken this volatile market to gambling, raising alarms about the risks involved.

Trump’s perspective on crypto has shifted dramatically since 2018, when he deemed it “highly volatile and based on thin air.” Fast forward to three years later, and he labeled Bitcoin a “scam” and warned that cryptocurrencies represent a “disaster waiting to unfold,” concerned they could undermine the supremacy of the U.S. dollar.

Experts predict that Trump’s recent commitments will pave the way for clearer—possibly less stringent—regulations, spurring the growth of cryptocurrencies and helping them gain mainstream acceptance.

Balancing Regulation: Advocates Seek Structure

Gary Gensler, the SEC chair under the Biden administration, has been a known skeptic of the cryptocurrency sector. (Trump pledged to oust Gensler on “Day One” of his presidency, although Gensler has since announced his departure in January.) Under Gensler’s tenure, the SEC has classified many cryptocurrencies as securities, which fall under its jurisdiction. The agency has taken legal action against several crypto exchanges, including Coinbase, for failing to register as security exchanges and for other regulatory noncompliance.

While the crypto community welcomed the nomination of Atkins, a former SEC board member and crypto lobbyist, concerns linger that he may sidestep regulatory measures, especially regarding the classification of cryptocurrencies as securities.

Yet the industry is still in its infancy, with established players like Coinbase advocating for regulations that foster predictability.

“What we want is to establish clear national guidelines for crypto markets,” Shirzad emphasized.

According to Prasad, the desire for regulation stems from a collective hope that clearer rules will ease the fears of institutions wary of engaging with cryptocurrencies. Due to their volatile nature, cryptocurrencies can yield rapid profits but can also plummet in value just as quickly. Moreover, their historical association with fraud and illicit activities adds to the hesitance.

“Every industry, including crypto, craves the legitimacy that comes with government oversight,” Prasad stated, as long as “regulations are light-touch” and don’t hinder profitability.

The crypto landscape is also battling for a foothold on U.S. financial markets. In January, the SEC approved 11 exchange-traded funds tied to Bitcoin prices, rekindling interest in crypto after the market’s recent turmoil following the spectacular collapse of FTX in 2022.

“[The SEC approval] provided added legitimacy to cryptocurrencies as financial assets. With financial products receiving SEC approval, retail investors could find comfort in their legitimacy,” Prasad commented.

Shirzad revealed that the industry advocates for cryptocurrencies to be recognized as commodities, thus aligning them with the regulation of the Commodities and Futures Trading Commission (CFTC) rather than the SEC, which has broader regulatory powers.

“If you’re trading securities, then you should be regulated by the SEC. For trading commodities, it should fall under the CFTC. It all hinges on the instruments being offered,” Shirzad explained.

Establishing a Crypto Strategic Reserve

A faction within the cryptocurrency community has suggested that the U.S. create a strategic reserve of cryptocurrencies, such as Bitcoin, an idea that Trump has championed.

A strategic Bitcoin reserve could serve as a financial safety net during crises, akin to the U.S. strategic oil reserve, which buys crude oil at lower prices and stores it for future needs.

Critics, however, argue that cryptocurrencies lack the strategic importance of energy resources.

During the Nashville conference, Trump proposed that instead of auctioning off seized Bitcoin, the U.S. government should stockpile it into a strategic reserve.

According to Brian Blank, an associate finance professor at Mississippi State University, such a reserve could help mitigate value fluctuations. “When an entity as large as the U.S. government holds a significant amount of an asset, it’s likely to stabilize the market,” he stated.

Blank further posited that a strategic Bitcoin reserve could enhance the legitimacy of the cryptocurrency sector, increasing demand among a broader audience. “If the U.S. holds Bitcoin, it would legitimize it and potentially enhance its value,” he added.

Becoming the ‘Crypto Capital of the World’

At the July conference in Nashville, Trump expressed his ambition to transform the U.S. into the “crypto capital of the world.” Recently, at a bitcoin conference in the UAE, Eric Trump touted his father as the “most pro-crypto president in American history.”

“We will have a clear roadmap, and hopefully, the rest of the world will follow our lead. We aim to set an example as Americans,” Eric Trump shared in a CNBC interview.

Industry analysts believe this vision can materialize if the administration rolls out favorable regulations and if Trump’s enthusiasm spurs greater public investment in cryptocurrencies.

Shirzad criticized the Biden administration’s regulators for pushing “huge portions” of the cryptocurrency industry out of the U.S., asserting that a Trump administration would reverse this trend.

“We can reclaim the U.S.’s position as a powerhouse for digital asset innovation,” Shirzad argued, highlighting that other nations are investing heavily to outpace the U.S. in the digital asset arena.

“The political commitment made by President Trump is incredibly encouraging,” he added.

The growing number of Americans investing in cryptocurrencies could mean a larger customer base for the industry, driving demand and growth for digital currencies. However, this influx could also pose risks for inexperienced investors.

“My concern is that retail investors are being drawn into this asset class without fully grasping the risks involved, which may be intolerable for many,” Prasad cautioned.

“The endorsement from the new president and his allies could mislead newcomers into believing cryptocurrencies are as stable as traditional assets like stocks or bonds. That scenario is indeed troubling.”