Trump administration poised to overhaul crypto regulations with new SEC leadership

• President-elect Donald Trump’s SEC nominees, led by Paul Atkins, are expected to initiate sweeping changes to cryptocurrency regulation, starting as early as Trump’s first day in office.
• The new SEC leadership, including commissioners Hester Peirce and Mark Uyeda, aims to clarify the regulatory framework for cryptocurrencies, potentially reclassifying digital assets and reviewing pending enforcement cases against major crypto firms.
• The crypto market has reacted positively to the anticipated changes, with Bitcoin surpassing $100,000. However, experts warn that reaching consensus on crypto regulations could take years and present challenges for the SEC’s credibility.
• Trump is expected to issue executive orders on his first day in office, focusing on advancing crypto policy, potentially including directives for federal agencies to review their crypto regulations and establish a strategic Bitcoin reserve.
• Trump’s appointment of tech entrepreneur David Sacks as the White House AI and crypto czar underscores the administration’s commitment to fostering innovation in the digital asset space and enhancing American competitiveness in emerging technologies.

As President-elect Donald Trump prepares to take office, top Republican officials at the U.S. Securities and Exchange Commission (SEC) are reportedly set to initiate sweeping changes to the agency’s approach to cryptocurrency regulation. Sources familiar with the matter say the overhaul could begin as early as Trump’s first day in office, marking a significant shift from the Biden administration’s aggressive enforcement stance.

The incoming SEC leadership, led by Trump’s nominee for chair, Paul Atkins, and commissioners Hester Peirce and Mark Uyeda, is expected to prioritize clarifying the regulatory framework for cryptocurrencies. This includes determining when digital assets should be classified as securities and reviewing pending enforcement cases against major crypto firms.

A new direction for crypto regulation

Under outgoing SEC Chair Gary Gensler, the agency pursued a stringent regulatory agenda, bringing at least 83 enforcement actions against crypto companies, including high-profile cases against Coinbase and Kraken. Gensler’s SEC argued that many crypto tokens functioned as securities and should comply with federal securities laws. However, critics, including Peirce and Uyeda, have long contended that the agency’s approach stifled innovation and created regulatory uncertainty.

“The Trump team has made it very clear that this is a priority,” a source told the Washington Post, referring to the administration’s focus on crypto policy.

Peirce and Uyeda, both known for their crypto-friendly views, are expected to spearhead the early stages of the rule-making process. This could include soliciting feedback from industry stakeholders and the public to develop clearer guidelines for the crypto sector. The pair previously served as aides to Atkins during his tenure at the SEC from 2002 to 2008, and sources say the three have already discussed potential policy changes.

Reviewing enforcement actions

One of the first tasks for the new SEC leadership will be reviewing ongoing enforcement cases, particularly those that do not involve allegations of fraud. Two sources told Reuters that the agency may freeze or withdraw some of these cases, a move that could signal a more lenient approach to crypto regulation.

Many defendants in these cases have argued that cryptocurrencies should be classified as commodities rather than securities, a distinction that would place them under the jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than the SEC. The lack of clear regulatory guidelines has been a persistent challenge for the industry, with companies calling for updated rules to provide greater clarity.

“I think the industry wants to see fraudsters or wrongdoers held accountable,” said Robert Cohen, a partner at Davis Polk and former SEC enforcement official. “But they also want a regulatory framework that makes sense.”

Executive orders and strategic reserves

In addition to the SEC’s internal changes, Trump is expected to issue executive orders on his first day in office aimed at advancing crypto policy. These orders could include directives for federal agencies to review their crypto regulations and potentially establish a strategic Bitcoin reserve, a move that would underscore the administration’s commitment to fostering innovation in the digital asset space.

Trump’s appointment of tech entrepreneur David Sacks as the White House AI and crypto czar further highlights the administration’s focus on emerging technologies. In a statement, Trump described Sacks as someone who “will guide policy for the Administration in Artificial Intelligence and Cryptocurrency, two areas critical to the future of American competitiveness.”

The crypto market has already responded positively to the anticipated changes, with Bitcoin surpassing $100,000 for the first time in December 2024 amid optimism about the new administration’s policies.

Challenges ahead

While the incoming SEC leadership is expected to take a more industry-friendly approach, experts caution that reaching consensus on crypto regulations could take months or even years. Dismissing enforcement actions en masse could also set a risky precedent, potentially politicizing the agency’s enforcement process.

“Dismissing dozens of enforcement actions would be unprecedented,” said Philip Moustakis, a partner at Seward & Kissel and former SEC attorney. “It could create challenges for the agency’s credibility.”

Some legal experts suggest that the SEC may opt to re-open settlement negotiations with crypto firms, a common practice aimed at avoiding lengthy litigation. However, under Gensler’s leadership, many companies complained that the agency was unwilling to engage in meaningful discussions.

As the Trump administration prepares to take the reins, the crypto industry is watching closely. With a new SEC leadership team in place and a president who has pledged to be a “crypto president,” the coming months could bring significant changes to the regulatory landscape for digital assets.

“This is a pivotal moment for the industry,” said one industry insider. “The hope is that we’ll finally get the clarity and support we need to innovate and grow.”

Sources include:

TheNationalPulse.com

ThePostMillenial.com

Reuters.com