Key Points
- A Republican president and Congress are expected to be more supportive of digital assets than the current administration.
- There is a reasonable chance that legislation creating a regulatory framework for cryptocurrencies will advance.
- Under Republican SEC chair nominee Paul Atkins, the SEC is expected to be less aggressive in enforcement in the crypto field and favor a more strategic approach.
- Banking regulators may reverse Biden-era policies that deterred banks from providing custodial and other services to crypto participants.
- The digital assets sector could see increased capital markets activity due to a more accommodating regulatory environment.
The incoming Trump administration and Republican-controlled Congress are likely to bring significant — and for industry participants, welcome — changes in the digital assets space.
Political efforts on behalf of cryptocurrencies were well organized and well funded this cycle, with crypto super PACs pouring record amounts into political races. These efforts focused heavily on Republican and key Democratic candidates, with the goal of seating more lawmakers expected to support efforts to bring much-needed regulatory clarity to digital assets.
Many anticipate pro-crypto policies and a lighter enforcement touch from the incoming administration.
Those political efforts appear to have paid off. Reports indicate that nearly 300 pro-crypto candidates from both sides of the aisle were elected to the House and Senate, and bitcoin prices have climbed to record highs in the wake of the election — a signal that many anticipate pro-crypto policies and a lighter enforcement touch from the incoming administration.
On the campaign trail, President-elect Donald Trump branded himself the pro-crypto candidate, announcing his intentions to transform the U.S. into the “crypto capital of the world.” And in December 2024, he nominated Paul Atkins, a former member of the Securities and Exchange Commission (SEC), to replace current Chair Gary Gensler, who pursued an enforcement agenda at the agency that many saw as anti-crypto.
Many players — both “crypto-native” and traditional financial companies and others — are eagerly waiting to see exactly what these political shifts will mean. Although it remains too early to predict with certainty, we highlight below key areas where we expect to see the most dramatic impacts.
New Key Players
Paul Atkins. President-elect Trump’s pick for SEC chair served as a Republican commissioner at the agency from 2002 to 2008, during which time he expressed caution before seeking to regulate new areas. He is generally viewed as pro-crypto, based on a number of factors, including:
- Atkins’ recent work in the digital asset space.
- His reputation as a critic of overregulation and regulation by enforcement.
- His ties to Republican commissioners Hester Peirce and Mark Uyeda, both of whom served as counsel to Atkins during his former SEC stint and have been outspoken critics of the SEC’s current approach to crypto.
While it remains to be seen how Atkins will engage on crypto-related topics, many in the industry expect an emphasis on clearer industry guidance coupled with a lighter and more focused enforcement touch.
David Sacks. Also in December 2024, President-elect Trump named Sacks, a venture capitalist and former PayPal executive, as the White House artificial intelligence (AI) and crypto czar. While Sacks is generally seen as pro-innovation and a supporter of the crypto sector, some industry participants were hoping for a crypto czar with a stronger track record favoring digital assets.
There was also some disappointment in the sector that this position will include AI rather than be devoted solely to digital assets. It remains to be seen how Sacks will allocate his focus between AI and crypto, and how much power he will wield within the administration — including whether he will drive policy or simply serve in a coordination role.
New Push for Crypto Legislation
It is expected that a new presidency will inject fresh life into efforts to enact laws to address the current legal uncertainty surrounding digital assets.
During the last Congress, the House passed the Financial Innovation and Technology for the 21st Century Act (FIT 21) to establish a regulatory framework for digital assets and allocate jurisdiction between the SEC and the Commodity Futures Trading Commission (CFTC). While FIT 21 does not give the industry everything it wants, it represents the most significant effort by Congress to date.
Overall, FIT 21 divides digital assets between “restricted digital assets” subject to SEC jurisdiction and “digital commodities” subject to CFTC jurisdiction. How assets are allocated depends, in part, on:
- The degree of decentralization of the digital asset’s blockchain-based network or application.
- Whether the digital asset was acquired in connection with capital-raising or a secondary-market transaction.
- Whether the asset is held by the issuer or an unaffiliated third party.
In general, the act is seen as limiting the jurisdiction of the SEC, since while the initial offering of a digital asset would be subject to disclosure and other requirements, once its blockchain network or application is deemed decentralized and functional, regulatory treatment — including that relating to trading — would be under the purview of the CFTC.
With Republicans controlling both chambers of Congress, a bill favorable to the sector has a reasonable chance of passing.
Meanwhile, members of the House Financial Services Committee have sought to broker stablecoin legislation that would be acceptable to both parties. With growing bipartisan support for such a bill, there is a good chance Congress will enact such legislation during the next administration.
Finally, there is renewed interest in creating a bitcoin strategic reserve. Wyoming Republican Sen. Cynthia Lummis has sponsored the Bitcoin Act, which would create a strategic bitcoin reserve for the U.S., along with a structured bitcoin purchase program. However, the concept has also drawn criticism in many quarters, including that bitcoin is too volatile for such a reserve, is not interest-bearing and would distort the overall crypto landscape by favoring bitcoin. At this stage, it is too early to assess whether the Lummis proposal will gain any traction.
Decreased SEC Enforcement
President-elect Trump campaigned on the promise of revamping the SEC. Although a less assertive enforcement approach is expected, the parameters will depend on the new chair’s leadership. Under the last Trump administration, for example, there was a fierce defense of the SEC’s registration provisions, even in cases that involved pure “failure to register” claims and no allegations of fraud. (See “A Significant Shift Away From ESG and Toward Crypto Is Expected at the SEC.”)
Increased Banking Activity
We expect federal banking and other financial regulators to revisit Biden-era policies and approaches to digital asset activities. Since 2021, the banking agencies have essentially frozen banks from engaging in custody and other pursuits by issuing interpretations that require them to obtain supervisory nonobjection. This has led to criticisms that an “Operation Choke Point 2.0” exists for the crypto industry, with regulators applying pressure on banks to “de-bank” controversial crypto-related business.
The rescission of these interpretations, as well as the likely reversal of SEC Staff Accounting Bulletin No. 121 — which requires crypto assets to be reported as both an asset and a liability on a custodian’s balance sheet — would mark a significant regulatory shift. It also could portend additional industry-friendly changes for the sector, which the president-elect has pledged to protect from regulatory “persecution.” (See “Trump 2.0 Could Mean a More Bank- and Fintech-Friendly Environment.”)
Increased Capital Markets Activity
The possibility of increased regulatory clarity, coupled with tailwinds of sustained investor interest, broader institutional adoption and increased venture capital funding, is likely to drive a significant rise in related capital markets activity, including IPOs. As the crypto economy continues to mature, we expect the convergence of regulatory developments and market enthusiasm to create robust opportunities for public listings, strategic transactions and deeper institutional engagement. (See “Betting on the ‘Trump Trade’ To Make the Capital Markets Great Again.”)
Increased Private Litigation
Cryptocurrency-related securities litigation has been a trending area for several years now, driven in large part by continued regulatory uncertainty and the SEC’s pro-enforcement posture.
If SEC enforcement is de-prioritized, we expect to see an increase in private securities litigation, led by plaintiff firms that have developed expertise in the area and are currently involved in actions around the country in connection with a range of digital assets, projects and products. This increase is particularly likely if it takes time for regulatory clarity to develop and digital asset prices are volatile — two ingredients that historically have fueled private plaintiff activity.
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