Cryptocurrency advocates have much to celebrate with President-elect Donald Trump’s victory in his new term.
Bitcoin topped $100,000 for the second time on Wednesday after first hitting the milestone in early December, a rally fueled by optimism that the Trump administration will be friendlier to the crypto industry.
“As the election approached, it became very clear that a Trump administration would essentially create a much more favorable regulatory environment for cryptocurrencies,” said Eswar Prasad, a trade policy professor at Cornell University. Ta.
Read more: Bitcoin hits all-time high less than two years after FTX collapse cast doubts on digital currencies
Its value rose 8 percent in the hours after Election Day. Dogecoin, a less popular cryptocurrency promoted by Trump ally Elon Musk, rose more than 18%.
With the president-elect now recruiting crypto enthusiasts into his administration, “I think it's clear that this is going to be a time when any regulation related to cryptocurrencies will be very advantageous to the industry,” Prasad said. These people added: Dynamics has “really strengthened cryptocurrencies as financial assets.”
Last week, President Trump announced he would nominate crypto advocate Paul Atkins to head the Securities and Exchange Commission and appoint former PayPal executive David Sachs to the new role of AI and cryptocurrency czar. Boost cryptocurrencies.
Trump, a former skeptic, pledged in June to make the United States the “crypto capital of the planet” and called for the creation of a “strategic reserve fund” for Bitcoin. Delivering a keynote speech at July's Bitcoin conference in Nashville, he also promised that crypto regulations will be created by “people who love” the industry. The Republican National Committee's platform included a sentence defending cryptocurrencies, and the Trump campaign announced that it would accept donations in cryptocurrencies. Trump and his family have backed his own cryptocurrency project, World Liberty Financial, which recently received a $30 million investment from cryptocurrency entrepreneur Justin Sun.
“We are very hopeful that the Trump administration and a more crypto-friendly Congress will make significant progress and lay out the basic building blocks of what an effective regulatory framework for crypto markets should look like. ” said Chief Policy Officer Faryal Shirzad. Coinbase, a major cryptocurrency exchange.
File photo: Republican presidential candidate and former US president Donald Trump gestures at the Bitcoin 2024 event in Nashville, Tennessee, US on July 27, 2024. Photo by Reuters/Kevin Wurm
Shirzad added that Trump's re-election is “a vindication for us” as a candidate who sought support from the crypto industry.
Cryptocurrency is a type of digital currency that is designed to be used on the internet, is created through a decentralized network, and is not backed by any government or bank. Bitcoin, the most well-known cryptocurrency, was created in 2009. Although this format has become more popular over the past decade, it is still not seen as a safe investment by most Americans.
Initially, proponents praised cryptocurrencies for offering privacy and providing an alternative currency outside the purview of national governments and the international financial system. Users of cryptocurrencies could theoretically make transactions that cannot be tracked by authorities or financial institutions. For the same reason, cryptocurrencies have attracted the interest of criminal enterprises.
Currently, most people who are actively involved in cryptocurrencies are not using them as a currency to purchase goods and services. Instead, it is primarily used as an investment, although some critics warn that the volatile nature of the industry makes it akin to gambling.
Trump's views on cryptocurrencies have evolved since 2018, when he described them as “very volatile and thinly based.” Three years later, he told Fox Business in an interview that Bitcoin looks like a “scam” and cryptocurrencies look like “a disaster yet to come.” He also complained that they undermine the international use of the US dollar.
Experts say President Trump's recent pledges will likely lead to clearer and perhaps less stringent regulation of the industry, which will help increase the currency's value and make it more mainstream. He states that he is deaf.
There are three things to keep in mind.
Advocates want more regulation, up to a point.
Gary Gensler, who will serve as SEC chairman in the Biden administration from 2021, is skeptical of the cryptocurrency industry. (Mr. Trump had promised to fire Mr. Gensler, whose term runs through 2026, on “day one” of his administration, but Mr. Gensler recently announced that he would resign in January.) Under Mr. Gensler's leadership, The SEC has considered many virtual currencies to be securities. It is under the jurisdiction of its regulatory authority. The agency filed suit against several virtual currency exchanges, including Coinbase, for failing to register as stock exchanges, brokers, and clearinghouses. The SEC has further filed lawsuits against other crypto exchanges, including global giant Binance, for artificially inflating trading volumes, improperly servicing U.S. customers, and misappropriating customer funds.
While the industry celebrated the nomination of Atkins, a former SEC board member and cryptocurrency lobbyist, to the SEC board, critics criticized him for not classifying cryptocurrencies as securities outside the SEC's jurisdiction. I believe it will help avoid regulations.
At the same time, the industry is relatively new. Existing players such as Coinbase say they need some regulation to create predictability.
“What we want…is to establish clear national rules for the cryptocurrency market,” Shirzad said.
The industry wants regulation, Prasad said, because “there are a lot of people and institutions who are very cautious about crypto-related transactions right now.” Cryptocurrencies are volatile, so while they can make quick profits, they can lose value just as quickly. They are also subject to fraud and were associated with illegal activity, including organized crime, especially in the early days of cryptocurrencies.
“Every industry, including the crypto industry, wants legitimacy from government regulation,” Prasad said, “as long as the government imposes very light regulations that don't prevent them from making profits.” Ta.
The cryptocurrency industry is also struggling to start trading in the U.S. financial markets. In January, the Securities and Exchange Commission approved 11 exchange-traded funds (ETFs) that sell publicly traded stocks linked to the price of Bitcoin.
With this announcement, the price of Bitcoin reached an all-time high of $47,000, signaling renewed interest in cryptocurrencies after a period of turmoil typified by the collapse of the cryptocurrency trading platform FTX in 2022. suggested.
“[The SEC approval]further strengthens the legitimacy of cryptocurrencies as financial assets. Having a financial product that has received SEC approval allows retail investors to believe that some of their products are legitimate products. It gave me a sense of security,” Prasad said.
Shirzad said the industry is hopeful that cryptocurrencies will be recognized as commodities and therefore be regulated by the Commodity Futures Trading Commission (CFTC) rather than the SEC, which is considered to be larger and has more regulatory power. He said he wanted it.
“If you're just trading securities, you should only be regulated by the SEC. If you're trading in commodities, you should be regulated only by the CFTC. It depends on the instruments you offer,” Shirzad said.
Creation of virtual currency strategic reserve fund
Some crypto advocates have proposed, and President Trump supports this, that the United States set aside strategic reserves for cryptocurrencies such as Bitcoin.
Bitcoin's strategic reserve is like a rainy day fund for emergencies and disruptions, allowing you to buy oil when oil prices are low and release it when prices rise in the future. It could function similarly to the U.S. Strategic Oil Reserve.
Critics of this idea believe that the analogy with oil is false, as cryptocurrencies do not have the same strategic value as fuel for transportation or energy production.
At a crypto conference in Nashville, President Trump called on the U.S. government to halt auctions of bitcoins seized by law enforcement and instead add them to the Strategic Reserve Fund.
Brian Blank, an associate professor of finance at Mississippi State University, said strategic reserves for cryptocurrencies could help smooth out fluctuations in value.
“When you have an organization the size of the U.S. federal government with a lot of assets, there's a good chance they're going to stabilize those assets,” he said.
Blanks also stated that Bitcoin's strategic readiness will also benefit the crypto industry by giving it mainstream appeal and creating greater demand among a wider range of people. .
“If the United States had a piece of it, it would be legitimized in a way. Being part of the mainstream might increase its value,” Blanks said. .
Making the United States the “crypto capital of the world”
At a July conference in Nashville, Trump said he wanted to make the United States the “crypto capital of the world.” At a Bitcoin conference in the United Arab Emirates this week, Eric Trump said his father would be “the most pro-crypto president in American history.”
“We have a clear roadmap and we hope the rest of the world will follow,” Eric Trump said in an interview with CNBC. “Hopefully we can set an example. Because that's what we're supposed to do as Americans.”
Crypto industry watchers and experts say this could happen if more favorable regulations emerge from the Trump administration and President Trump's enthusiasm prompts more people to buy cryptocurrencies for profit. I think it's sexual.
An illustration of US President-elect Donald Trump holding Bitcoin is posted outside a cryptocurrency exchange after Bitcoin exceeded $100,000 in Hong Kong, China on December 5, 2024. Photo by Reuters/Tyrone Siu
Shirzad accused regulators under the Biden administration of driving “a large portion” of the cryptocurrency industry out of the country. He believes the Trump administration will reverse that.
“We can restore (the United States') leadership position as a hub for digital asset innovation,” Shirzad said, arguing that other countries are investing heavily “to try to beat us in the digital asset market.” did.
“I think President Trump’s political commitment is really gratifying,” he added.
More Americans investing in cryptocurrencies means more potential customers for the industry, potentially increasing demand and growth from cryptocurrencies. It could also mean increased risk for new investors.
“What I am very concerned about is that there are retail investors who are being sucked into this asset class. You will never be able to tolerate the risk,” Prasad said. Said.
“The fact that the new president and his entourage are so supportive of it, and the fact that they have endorsed crypto-related products, makes them think that this is just like any other asset like stocks or bonds. may tempt you,” and so on. And I think that's very worrying. ”
