With Trump in the White House, a new era for cryptocurrencies evolves

The 47^th president has promised to make the US a cryptocurrencies hub. Will the new regime offer firms the regulatory guidance they’ve been asking for?

Frustration with the former chair of the US Securities and Exchange Commission (SEC), Gary Gensler, has been a uniting viewpoint for those involved in the evolution of cryptocurrencies and digital assets in the US. 

Critics claimed that during Gensler’s tenure, the SEC did not offer clear regulatory guidance to the industry and set itself up as the sole arbitrator of who could and could not participate in the burgeoning sector. Over the past few years, a wide range of crypto players, from decentralised finance startups to traditional global banks, have viewed the US approach as arbitrary, vague, and often hostile.

While on the campaign trail, President Donald Trump promised he would make the US a global crypto hub, and fire Gensler; the outgoing chair announced his resignation when Trump won the election in November 2024. Trump’s proposed replacement, former SEC commissioner Paul Atkins, is not only seen as more welcoming to the crypto industry but also considered a sensible choice by many. 

“I’m a huge fan of Paul Atkins,” says Hermine Wong, lecturer at the University of California, Berkeley, school of law, former head of policy at online cryptocurrency platform Coinbase, and former special counsel at the SEC. “I think this is a very uncontroversial pick. Paul Atkins has a great history of working really well on both sides of the aisle, so I don’t see him dropping the ball on the SEC core mission in any way.”

Atkins is co-chair of the Token Alliance, a cryptocurrency advocacy group for the Chamber of Digital Commerce, which seeks to establish clear and balanced digital asset regulations.

Crypto task force

This week, in a move welcomed by many, current acting chair of the SEC Mark Uyeda named fellow commissioner Hester Peirce as head of a new cryptocurrency task force. Peirce, known for her support of cryptocurrency, has earned the nickname ‘Crypto Mom’ from the community. 

The task force’s goals are to “help the commission draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously”, according to an official statement. 

Also this week, Trump and wife Melania both launched competing cryptocurrency tokens, or meme coins. The total nominal value of the president’s token reached $14.5bn and Melania’s nearly $3bn; however, both have decreased in value by almost 50% at the time of writing.  

Views on the meme coin were mixed. Caitlin Long, founder and chief executive at Custodia Bank, a provider of digital asset payment and custody solutions for US businesses posted on LinkedIn that while she was “no memecoin fan”, she placed “significant blame on the Warrenite [a reference to US senator Elizabeth Warren] financial regulators who refused to define guardrails”. 

“Instead [they] tried to kill the whole crypto industry – targeting especially the law-abiding players for the harshest treatment, including Custodia Bank. Let’s watch what Trump’s financial regulators do once they’re in office,” said Long.

Tailored guidance

Lowell Ness, a partner at law firm Perkins Coie in Palo Alto, which advised digital asset infrastructure provider Ripple during its lawsuit with the SEC, says he “sorta” agrees with Gensler that the SEC did offer “at some level” guidance to the cryptocurrency industry. “We just didn’t like the answer as an industry,” he adds. 

Ness predicts the SEC will create specific guidance tailored to cryptocurrencies, similar to the EU’s Markets in Crypto-Assets Regulation (MiCAR), rather than reuse existing laws governing securities. Those existing laws caused debate, as well as demands for clearer guidance, within the cryptocurrency sector. 

The US Court of Appeals for the Third Circuit in Philadelphia recently ruled that the SEC’s initial response to Coinbase’s request for crypto-specific rulemaking was unacceptable. 

“Because we believe the SEC’s order was conclusory and insufficiently reasoned, and thus arbitrary and capricious, we grant Coinbase’s petition in part and remand to the SEC for a more complete explanation,” the order reads. 

The US tends to rely on the Howey test – a legal framework established in the 1946 case SEC v. W.J. Howey Co – to determine if a transaction is an investment contract and should be regulated. Many people are frustrated with how the SEC uses the test to analyse whether digital assets are securities, arguing it is not equipped to handle the nuances of modern decentralised technologies. 

“The basic problem with crypto is it’s only a security because of the secondary markets,” says Ness. “It really doesn’t have its own financial return associated, it’s not like shares of stock with dividends, it’s not an ownership in anything, it isn’t a right to anything, and it’s just this odd property going up in value.”

How to handle secondary trading of crypto assets is “one of the biggest open questions”, he says.

Court ruling

In July 2023, Analisa Torres of the US District Court for the Southern District of New York ruled that programmatic trades on exchanges aren’t securities transactions under the Howey test. Regarding a case between the SEC and Ripple, Torres ruled that Ripple’s XRP token sales to institutional clients violated US securities laws. However, she ruled that XRP sales on exchanges and other public markets were not securities. 

Ripple was fined $125 million in 2024, and both parties are currently appealing.

Appropriate balance

Ness predicts that new leadership at the SEC might follow the Torres ruling and conclude that an appropriate balance is struck if primary sales transactions by the crypto asset issuer in capital raising with investors are regulated as securities transactions. In contrast, secondary resales on crypto exchanges aren’t securities transactions. Ness argues it is not practical to inject a broker-dealer into every crypto transaction, as crypto assets need to transact and move value “at the speed of software”.

Ijeoma Okoli, a director at independent think-tank the Digital Economy Initiative, believes the SEC crypto rules should be constructed in a way to ensure consumers are protected, while ensuring it is not stifling innovation. 

“I would term it more as welcoming of innovation and allowing people – grown-ups – to make decisions about where they put their money, good or bad,” she adds. “It’s essentially about putting up guard rails to make sure that if something goes wrong, they’re protected as much as possible – but it shouldn’t be the role of regulators to tell people where to put their money.”