Trump’s Crypto Regulatory Changes Kick Off With SEC Task Force

Between the very pro-crypto Trump Administration and a Republican-controlled Congress, crypto regulations are on the verge of changing in a big way.

From ending the Securities and Exchange Committee’s (SEC) determination that all cryptocurrencies save bitcoin and ether are securities to the regulation of stablecoins, it’s clear that Congress and the administration are on the verge of giving crypto a lot of what it wants.

“Under the Trump administration, the U.S. crypto landscape has the potential to thrive,” said Luca Sorlini, head of product at Northstake, which builds tokenized staking for institutions. “American crypto companies currently operating offshore could relocate back to the U.S., enriching the domestic ecosystem.”

“With clear regulatory guidelines, companies could focus on value creation and take greater risks to innovate, rather than expending resources on navigating legal uncertainties,” Sorlini added.

Here’s a look at what’s coming in the way of new regulation.

“Crypto Mom’s” SEC Overhaul

It starts with the SEC’s new crypto task force headed by Commissioner Hester Peirce, who got the nickname “Crypto Mom” for her early advocacy of sensible crypto regulation.

Created by Acting Chairman Mark Uyeda and staffed by his senior advisor, Richard Gabbert, and senior policy advisor, Taylor Asher, the task force will end the current “regulation by enforcement.” The policy left crypto firms with no clarity on what they needed to do to meet the SEC’s requirements other than looking at court cases it brought.

Instead of regulating “retroactively and reactively,” Uyeda said in his announcement of the task force, it aims to provide “clarity regarding who must register, and practical solutions for those seeking to register.”

It will “draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously,” the release added.

Aside from clear guidelines over what is and is not a security and when a token is a commodity under the jurisdiction of the Commodity Futures Trading Commission (CFTC), the industry wants the task force to:

• Clarify the rules for token offerings
• Clarify how stablecoins are regulated, including clearer rules on custody, reserve requirements and market conduct.
• Exempt utility and governance tokens from SEC control
• Provide a framework for decentralized finance (DeFi)

This is happening as the SEC awaits the appointment of Chairman-designate Paul Atkins, a process likely to take months.

FIT21

The House already passed the bipartisan Financial Innovation and Technology for the 21st Century (FIT21) Act under retiring Financial Services Committee Chairman Patrick McHenry (R-N.C.). Incoming Chairman Rep. French Hill (R-Ark.) has pledged to pass it again quickly.

The bill creates a regulatory framework for digital assets. This includes:

• Setting rules for when a token is a “restricted digital asset” under the jurisdiction of the SEC or a “digital commodity” under the jurisdiction of the CFTC. By default, tokens would be commodities unless the SEC rules otherwise.
• Give the CFTC a wider role in regulating cryptocurrencies
• Giving the SEC 60 days to rule on whether an asset must register as a security, not a commodity
• Requiring stablecoins to maintain one-to-one dollar reserves
• Allows secondary trading of coins that are security tokens that must register with the SEC

The Senate would have to pass something similar. Given that the Senate’s new digital assets subcommittee is chaired by crypto-friendly Sen. Cynthia Lummis (R-Wyo), this doesn’t seem like a stretch.

Other regulatory actions

On Jan. 24, Trump signed an executive order creating a working group including new AI and Crypto Czar David Sacks, as well as the SEC and CFTC that would have 30 days to identify all regulations affecting crypto, recommend modifying or repealing them within 60 days and file a report with new recommendations by 180 days.

It also bans a central bank digital currency (CBDC) and discusses setting up a digital assets stockpile. The latter is not a strategic bitcoin reserve but probably maintaining all the crypto the government currently owns due to seizures.

Clarity for Stablecoins Payment Act: A separate bill defining stablecoins, requiring them to be backed one-to-one by dollars and audited, and allowing state regulators to approve the launch of stablecoins without approval of the Federal Deposit Insurance Corporation (FDIC). Given how close Republicans and Democrats were to passing a bill in the past session, and how much simpler it is that the major overhaul needed to reform crypto policy, this is likely to pass first.

Repeal the SEC’s SAB 21: The SEC’s Staff Accounting Bulletin No. 21 required a company holding crypto for a customer to keep it on its own balance sheet. What that means is that banks custodying crypto for customers would be under restrictions that effectively remove them from the custody business.

Repeal the IRS’ DeFi brokers regulation that would require “brokers” in DeFi protocols that have no real contact with customers to maintain and report user information. The problem is that the definition of broker is so wide that protocols without anyone to collect that information would be drawn in.

Investigate the Biden Administration’s so-called Operation Choke Point 2.0 initiative, which effectively debanked crypto exchanges and other companies. It helped bring down crypto-focused financial institutions Silvergate Bank and Signature Bank.

President Donald Trump has promised that the U.S. would create a strategic bitcoin reserve to boost the U.S. position as the “crypto capital of the planet.” Other countries would likely follow suit.