What a Trump Presidency Means for Cryptocurrencies

The American people have spoken, reelecting Donald Trump to the White House.

Now, a few weeks later, Trump's cabinet picks are beginning to take shape. His selections have caused a lot of front-page political commentary. But aside from that, we have our first glimpse of what his second term might mean for key industries... including cryptocurrency.

Crypto is still young compared with many American institutions. So it will likely see especially big impacts from a changing of the guard.

It's too early to know exactly what will unfold. But it's clear the Biden administration's "hawkish" stance on crypto is coming to an end...

Trump's pick to lead the U.S. Securities and Exchange Commission ("SEC") remains uncertain. But one name is certain to exit the stage: Gary Gensler.

Gensler has led the SEC under President Biden. And he has been a constant thorn in the crypto industry's side.

Rather than creating a regulatory framework for the industry, Gensler and the SEC have instead acted through court battles...

For instance, they slapped major crypto companies – including Coinbase and Kraken – with lawsuits for operating as "unregistered securities exchanges." This is all despite the SEC not having officially defined whether most cryptocurrencies count as "securities."

The results of these lawsuits could potentially set legal precedents. That would effectively create regulation through the court system instead of Congress.

Gensler's approach has stifled innovation. Crypto firms have been left in a fog of regulatory confusion. So his departure will likely be a major victory for the crypto industry.

And the shift goes beyond Gensler. As of November 8, 48 out of 48 crypto-backed U.S. political candidates had won their elections.

It will now likely fall to Congress to draft a sensible regulatory framework, not the courts. The industry is now poised for a regulatory reset... one that could finally bring in the safeguards and transparent rules that stakeholders want to see.

Meanwhile, the rhetoric on cryptocurrency in Trump's party suggests a broader shift in federal policy...

For one, Republican leaders, like Wyoming Senator Cynthia Lummis, have floated the idea of a "strategic bitcoin reserve." This would essentially be a sovereign wealth fund for digital assets.

Meanwhile, Trump himself has also called for increased domestic bitcoin mining. That will likely help the U.S. secure leadership in the global crypto space.

These conversations are a big shift. The highest levels of government are getting much more interested in crypto and its possibilities.

Now, I wouldn't expect a strategic bitcoin reserve anytime soon...

But a much more immediate possibility could be new crypto-focused exchange-traded funds ("ETFs").

While the Biden-era SEC approved the first bitcoin ETFs, it drew the line at more complex products, like those holding other major crypto assets... or "staking"-enabled funds.

For instance, we now have ETFs based around the cryptocurrency Ether – but those funds can't yet offer any staking benefits. Staking, in the simplest terms, is a way to help validate crypto transactions and earn rewards on the crypto you own.

A staking-enabled Ether fund could generate a yield for shareholders (similar to dividends). Gensler's SEC blocked these proposals time and time again... But under Trump, such ideas are likely to gain traction. We could soon see yield-bearing crypto assets bringing in institutional and retail investors alike.

It's still early... but Trump's victory marks a potential turning point for an industry that has often felt under siege.

Gensler is on his way out. A more crypto-friendly regulatory environment is coming. And the stage is set for an era of expansion.

Whether we see a clear regulatory framework, ETFs, staking products, or even national reserves, the crypto industry is poised to capitalize on this political shift. That means investors should pay close attention.

Good investing,

Andrew McGuirk

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