As it became clear on Election Night that President-elect Donald Trump was set to return to the White House, crypto markets, unsurprisingly, began to rise, reflecting optimism about the relief a Trump administration will likely bring to the industry. There is no denying that Trump will be a more pro-crypto president than President Joe Biden has been. However, there are uncertainties over how much he will be involved with advancing the industry and how likely a law can be passed in Congress amid a crowded legislative agenda.
Trump’s position in the White House will mean a refreshed perception of the crypto industry at the top of the executive branch. Still, his choices of regulatory nominees will be critical to shaping his administration’s policies toward the sector. Key positions to watch include who Trump nominates to lead the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Treasury Department.
All candidates for these positions will likely share Trump’s favorable view of the industry, but it is unknown how high of a priority it may be. The Trump administration is likely to prioritize deregulation across most sectors. However, crypto is the one area that could go against that trend, with industry members eager for regulatory clarity. How high of a priority crypto is for these regulators will determine how long that process takes, but winding down some of the SEC’s current lawsuits could be faster. Still, more likely than not, there will at least be some form of favorable regulatory guidance, if not a rule, from these agencies.
The most important guidance that could be given is a joint document from the SEC and CFTC on how the two agencies will determine whether a token is a security or a commodity. If pursued under the Trump administration, this guidance would likely lean toward the industry-preferred perspective, and most tokens would be commodities rather than securities. However, this issue of classifying tokens is also among the likely areas that Congress would address with legislation, such as a bill similar to the Financial Innovation and Technology for the 21st Century Act if a crypto-related bill is going to pass. The advantage of making this change through legislation is that it would be harder for a future crypto-skeptical industry to walk back than an interpretative rule or agency regulation.
A Republican trifecta, which looks relatively likely at this point, is the best election outcome the crypto industry could have hoped for at the federal level, especially for trying to get legislation through Congress. The most critical win for the sector was Senator-elect Bernie Moreno’s (R-Ohio) victory over Senator Sherrod Brown (D-Ohio), as it removed a powerful industry opponent and was vital in ensuring a Republican-controlled Senate. The House has yet to be officially determined as races remain uncalled, but Republicans are in a favorable position to defend their majority, according to The Cook Political Report.
Still, passing a bill like FIT21 or other crypto-related legislation in the next Congress is not guaranteed. These measures will likely require the support of some Democrats in the Senate, and there is uncertainty over how high of a priority the bills may be amid a crowded legislative agenda. Additionally, who will succeed House Financial Services Committee Chair Patrick McHenry (R-N.C.) remains undecided, and the victor will significantly impact the chances and timing of getting any of these bills done. In the Senate, Senator Tim Scott (R-S.C.) is in line to become chair of the Senate Banking, Housing, and Urban Affairs Committee. While a crypto supporter, Scott has yet to indicate that it is a top priority.
The outlook for crypto under Trump and a unified Republican government has undoubtedly improved from its position under the Biden administration. However, this change will likely take some time to manifest itself as new agency heads need to be confirmed by the Senate, and passing laws through Congress is a notoriously slow and difficult process, even when one party controls the White House and both chambers of Congress.