Pro-Crypto Reforms Signal Ahead Under Trump Administration
In a series of recent developments, the Trump Administration appears to be signaling a shift toward more favorable regulatory policies for the cryptocurrency and digital asset industry in the United States. These early actions suggest a potential easing of restrictions, which could give both established financial institutions and crypto-native firms greater flexibility in engaging with digital assets.
Here’s a quick overview of the key events:
1. White House Executive Order: Strengthening American Leadership in Digital Financial Technology (January 23)
The White House issued an Executive Order (EO) focused on establishing U.S. leadership in digital financial technology. The EO aims to provide regulatory clarity and secure America’s position in the digital asset economy.
Key aspects of the EO include:
- A New Working Group: This group is tasked with developing a federal regulatory framework for digital assets, including stablecoins, and also evaluating the creation of a strategic national digital assets stockpile. Notably, it won’t initially include representatives from the Federal Reserve, FDIC, or the Office of the Comptroller of the Currency.
- Stablecoin Promotion: The EO promotes the development of lawful and legitimate dollar-backed stablecoins worldwide.
- CBDC Prohibition: The EO generally prohibits agencies from taking any action to establish, issue, or promote central bank digital currencies (CBDCs).
- Revocation of Prior EO: The order also revokes the Biden Administration’s 2022 Executive Order on digital assets (Executive Order 14067).
2. Securities and Exchange Commission (SEC) Actions
- Repeal of SAB 121 (January 23): The SEC repealed Staff Accounting Bulletin (SAB) 121. This bulletin had required financial institutions holding digital assets for customers to report them as a liability on their balance sheets, potentially increasing the regulatory burden on these institutions. Its repeal appears to give digital asset custodians more flexibility in structuring their services.
- Creation of Crypto Task Force (January 21): The SEC announced the formation of a Crypto Task Force led by Commissioner Hester Peirce, known for her supportive views on crypto. The Task Force will focus on providing regulatory clarity, crafting sensible disclosure frameworks, and deploying enforcement resources effectively.
Previously, Commissioner Peirce proposed a “token safe harbor” which would provide a bridge from a token having an initial development team to being sufficiently decentralized such that it would no longer be an “investment contract” under Howey.
3. Federal Deposit Insurance Corporation (FDIC) Policy Reset
Acting Chairman of the FDIC, Travis Hill, signaled a need to reset the agency’s approach to digital assets. He noted that the previous process, requiring individual engagement with regulators before engaging in digital asset activities, had hindered innovation and was, in his view, ‘damaging’. He suggested a more open approach to innovation and technology adoption, including greater transparency in fintech partnerships and digital asset dealings.
4. Commodity Futures Trading Commission (CFTC) Leadership Changes
Caroline Pham was appointed as the Acting Chairman of the CFTC. She has previous experience in digital assets and helped to sponsor the CFTC’s Digital Assets Market subcommittee. Following her appointment, the CFTC announced the appointment of Harry Jung as the Acting Chief of Staff, who will lead engagement on crypto and DeFi.
5. Congressional Developments
- Senate Banking Committee Priorities: Senator Tim Scott (R-S.C.), the Chairman of the Senate Banking Committee, announced the committee’s priorities for the 119th Congress, which include developing a framework for digital assets, including stablecoins. Senator Cynthia Lummis (R-WY), a pro-crypto advocate, was appointed as the chair of a new Senate panel devoted to digital assets.
- IRS Rule Disapproval: Representatives Mike Carey (R-OH) and Senator Ted Cruz (R-TX) introduced resolutions to repeal an IRS rule applying digital asset broker tax reporting requirements to certain DeFi service providers.
6. Proposed Legislation
Several pieces of legislation are currently under consideration that could impact the future U.S. regulatory framework for digital assets. These include:
- Financial Innovation and Technology for the 21st Century Act (FIT 21): Aims to establish a federal digital asset regulatory framework, allocating distinct jurisdictional boundaries to the SEC and CFTC over digital assets, among other reforms.
- Lummis-Gillibrand Responsible Financial Innovation Act: This bill aims to establish a federal digital asset regulatory framework, putting the CFTC as the primary federal regulator of most digital assets, as well as proposing concrete restrictions and obligations on digital asset intermediaries and stablecoin issuers.
- Clarity for Payment Stablecoins Act of 2023 (H.R.4766): Establishes clear reporting requirements for stablecoin issuers, mandating specific reserve asset types.
- Lummis-Gillibrand Payment Stablecoin Act (S.4155): Aims to create a regulatory framework for payment stablecoins.
- Bitcoin Act of 2024 (S.4912): Proposes establishing a strategic bitcoin reserve for the U.S. government.
- CBDC Anti-Surveillance State Act (H.R.5403): Aims to prevent the Federal Reserve from issuing CBDCs to individuals, addressing financial privacy and government surveillance concerns.
These developments signal a potentially less restrictive regulatory environment for the crypto industry. The coming months will likely see further policy proposals and regulatory actions that will shape the future of digital assets in the United States.
