Analysis: Crypto players ready wishlist for potential second Trump administration

Cerus

31/07/2024 11:00

By Hannah Lang
       July 31 (Reuters) - When former U.S. president Donald
Trump promised a bitcoin conference on Saturday that if
reelected he would fire Securities and Exchange Commission Chair
Gary Gensler, a crypto skeptic, the crowd roared with delight. 
    "Wow, I didn't know he was that unpopular," the Republican
presidential nominee shouted over the cheers.
    Trump, who once derided cryptocurrencies as a "scam," is
courting the industry and winning big checks from donors hoping
he will swiftly end Gensler's crypto crackdown.
    Under Gensler, a Democrat appointed by President Biden, the
SEC has brought dozens of crypto enforcement actions, including
against major exchanges Coinbase  COIN. , Binance and Kraken,
and levied hundreds of millions of dollars in fines. 
    A Trump victory could change that virtually overnight. He
could appoint a crypto-friendly chair to advance the industry's
wishlist, which includes spiking guidance that it says has
limited Americans' crypto custody options; a safe harbor for new
tokens; and pulling enforcement actions.
    "The most important thing we want out of a new
administration is the nomination of individuals to key positions
... that have an appreciation and an understanding of crypto,"
said Kristin Smith, CEO of the Blockchain Association, an
industry group.
    Gensler's spokesperson declined to comment.
    Citing a Supreme Court ruling, Gensler says most crypto
tokens behave like securities and should be strictly regulated
in the same way, a position lower courts have mostly backed. 
    Crypto firms argue tokens are commodities and want new laws
clarifying their status, although that could take years if
Congress remains divided.
    While Gensler's term ends in 2026, Trump could replace him
with another commissioner as acting chair. The likely candidate
is Hester Peirce, a crypto advocate and the longer-serving of
the SEC's two Republican commissioners.
    The industry is pushing crypto enthusiasts Brian Brooks and
Chris Giancarlo, who served in Trump's first administration, for
the permanent job, executives said.
    An acting chair could immediately rescind 2022 SEC guidance
requiring public companies to account for crypto assets held on
behalf of others as liabilities due to their riskiness. Banks
struggle with this policy because strict capital rules require
them to hold cash against liabilities.
        Cryptocurrencies, with a market capitalization of around
$2.5 trillion according to CoinGecko, would become more popular
if consumers could store them with trusted lenders, executives
say.
    "I believe that'll be rescinded Day One of the Trump
administration," said Cody Carbone, chief policy officer at the
Chamber of Digital Commerce, a digital asset group. 
    The industry is also pushing for a safe harbor from SEC
registration rules for issuing and trading crypto tokens, an
idea Peirce floated in 2020.
    "We need to look for a workable way to ensure both that
token offerings can occur outside of the legal shadows and that
token purchasers have access to the information they need,"
Peirce told Reuters by email. 
    Smith said such a framework would be "incredibly positive." 
    Giancarlo, who earned the nickname "Crypto Dad" when he was
Commodity Futures Trading Commission chair, declined to comment
on whether he would be interested in becoming SEC chair under a
second Trump administration.
    Until Congress acts, regulators have discretion to craft an
interim regulatory regime that better serves the public and
investors, he said. He also backed a crypto safe harbor.
    "It would be an excellent place to start a new era of
engaging with this innovation," Giancarlo said. 
    Brooks did not respond to a request for comment. 
    Brian Hughes, senior advisor to Trump's campaign, said in a
statement the former president is prepared to remove "obstacles
and unnecessary burdens" for crypto. 
     
    POLITICAL DEADLOCK?
    A new chair's power would depend, though, on the political
weighting of the five-member commission which votes on rules,
enforcement and other major issues. It is dominated 3-2 by
Gensler and two other Democrats also critical of crypto.
    While the president can replace an SEC chair with another
commissioner, Gensler could still see out his term as
commissioner. Even if he left, the four remaining members would
be evenly divided initially, constraining a new chair.
    Peirce said, for example, that she expected any safe harbor
plan and major proposed changes to enforcement litigation, to go
to a commission vote, suggesting approval might have to wait
until Republicans take the majority.
    Giancarlo said he would like a pause in enforcement actions
where there is no investor harm, manipulation or fraud.
    "I think the right approach would be to pause it ... while
the agency immediately turns to rule-writing in coordination
with Congress and then give innovators time to comply,"
Giancarlo added.

 (Reporting by Hannah Lang in New York; editing by Michelle
Price and Richard Chang)
 ((Hannah.Lang@thomsonreuters.com))