What Can Trump Change in US Crypto Regulation?

It is only a few days before the US Presidential Elections. Trump and his teammates have promised a more liberal approach towards crypto than Democrats. Also, the Republican candidate is leading on Polymarket and even in some polls like a potential winner. In this article, I’d like to describe possible upgrades in the US crypto regulation that Donald Trump may make.

What exactly did Trump promise to the crypto community?

While Kamala Harris only mentioned cryptocurrencies for the first time at the end of her campaign, Trump has been discussing them a lot this year. He held personal events and meetings dedicated to cryptocurrency, including his speech this July at the Bitcoin Conference in Nashville.

During the event the Republican candidate promised that he would not allow the creation of CBDC, the digital dollar - so as not to restrict Americans' financial freedom. Also, Trump promised to create a strategic reserve of Bitcoin, he emphasized that the US Government under him will no longer sell Bitcoin and will hodl it. Moreover, he pointed out the creation of special task force for crypto policy of US - Bitcoin and crypto presidential advisory council.

The Republican Party's program also has a paragraph dedicated to crypto - about protecting the rights of Americans to self-dispose of their own assets: “We will defend the right to mine Bitcoin, and ensure every American has the right to self-custody of their Digital Assets, and transact free from Government Surveillance and Control.”

And it is still the biggest emphasis from Republicans is that they will not allow the creation of CBDC, the government's digital currency. This point is primarily important for libertarian voters and wealthy Americans. After all, CBDC by its properties implies even greater government control over currency than classic fiat currency.

Bitcoin Bill

During the Bitcoin Conference, where Trump lavished his promises to Bitcoiners, Republican Senator Cynthia Lumis also spoke. Let's talk more about this senator and its legal initiatives. Just before the conference, she introduced the Bitcoin Strategic Reserve Bill.

The bill shortly determines that US government will save its current Bitcoin reserve and moreover it will purchase 1 million Bitcoin. The law requires the U.S. to purchase bitcoins for 5 years - at least 200,000 per year. And the total amount for this period - 1 million BTC. Also the creation of a transparent system of proof of reserve. The law also prohibits the sale of bitcoins already in the government's possession.

If Trump is elected, he will certainly be in favor of the bill - but its passage depends on the position of Congress and the Senate. If the Republicans have a majority there, there is little doubt about it. On the other hand, Democrats may at least modify some provisions of the bill or even advocate its rejection as populist and risky for public finances. However, there are also Democrats who support this bill, such as Democratic Representative Ro Khanna.

What really matters for the future of crypto in US?

However, Trump's promises to stop CBDC and make Bitcoin reserve are just the tip of the iceberg in regulating cryptocurrencies in the US. What matters to crypto businesses and regular users is the regulation of cryptocurrencies in the country as a whole - rights of crypto users and opportunities for investors, licensing requirements for legal entities, as well as taxation of crypto gains. Let's take a look at how a possible Trump presidency could affect this.

In fact, there are at least two more important pieces of legislation than Bitcoin bill to discuss here:

💡Financial Innovation and Technology for the 21st Century Act

💸Payment Stablecoin Act

The basic part of new US legislation dedicated to cryptocurrency, which is likely to be approved after the Elections, is “FIT21”—The Financial Innovation Act in 21 Century. This is a long document, that already was approved by the US Congress and had bipartisan support—almost all Republicans and half of Democrats. However, the law was postponed by the US Senate for a period after the Presidential Elections.

The future of this law really depends on the position of the future president of the United States and the results of the elections. The most important thing is that this law will make crypto regulation in the U.S. more certain - now there are several regulators in the country, each of which has its own position on crypto: SEC, CFTC, FINCEN, IRS and some others.

Many lawmakers believe that the SEC abuses its powers and restrains the development of crypto-business in the United States. Two SEC commissioners (Hester Pierce and Mark Uyeda) also speak a lot about it. The FIT21 law is essential to make the legal landscape on crypto more defined and transparent.

Since Cyntia Lummis supported Trump's Bitcoin Reserve initiative and she also worked on the Financial Innovation Act, along with Congressman Patrick McHenry, there is little doubt that this legislation will be supported by the Republicans after the election and Trump, being an elected President, can support final approval of FIT21 in the Senate.

What about Stablecoin Act?

This law proposed by the same Cynthia Lummis and Kirsten Gillibrand (democrat) create a transparent framework for stablecoin regulation in the US, since now there is no clear regulation. Larger stablecoin issuers will be registered by the Comptroller of the Currency (OCC). The law prohibits algorithmic stablecoins and requires 1-to-1 provisioning. It also gives the Fed authority to control it. Small stablecoin issuers will be licenzed on the state level.

The future of this law if Trump wins is more difficult to predict - that's why it has not been put to a vote in Congress. In addition, there is no official position on it from Tether, Circle and Coinbase. Nevertheless, given that the law has support of Republicans (Patrick McHenry, Maxine Waters, Cynthia Lummis) and also Democrats (Kirsten Gillibrand) - and its requirements for issuers can be called compromise, it may also be adopted after the presidential election. Unless, of course, the new administration declares a different stance towards stablecoin.

From my point of view it is in the interest of the US to make dollar pegged stablecoins available to users worldwide. In this regard, unfortunately, the position of Janet Yellen looks very strange, who stated the danger of investments from issuers of stablecoins to US T-bills. You can see that in the European Union local stablecoin market is developing slow - it has over regulation because of some MiCA requirements - which is too tough for EUR backed stablecoins. I hope that the new US president and lawmakers will make more flexible regulations for stablecoins.

Why republicans (and democrats) care about crypto so much?

By the way, let's look at this election from a different perspective - politicians are not only interested in innovation. Another possible reason why both Republicans and Democrats support the crypto industry so strong is because of large campaign donations from it. According to Public Citizen in 2024 crypto companies have spent $119 mln to the federal elections. This is 44% from total corporate spending. Most of the funding goes through a special crypto industry PAC, the Fairshake PAC. It’s founded by Coinbase ($50 mln), Ripple ($49 mln), Jump Crypto ($15 mln), Andersen Horovitz ($1,75 mln), Payward, Circle, Paradigm and some other donors.

By the way, this structure finances not only Republican candidates, but also some Democrats. According to Public Citizen, its task is also to prevent the election of those who have a bad attitude towards cryptocurrencies.

This May Donald Trump campaign started to accept donations in crypto and it got about $7,5 mln according to CNBC. According to Washington Post crypto entrepreneur David Bailey has promised to Trump $15 mln of donations before his visit to Nashvielle. Also Donald Trump got donations from Gemini founders - Tyler and Cameron Winklevoss - $1 million in Bitcoin each. However, Harris and other Democrats are also getting support from some cryptocurrency entrepreneurs - like Chris Larsen (Ripple) and Tim Drapper.

Of course the money factor plays a big role, but we can't ignore the other thing - the real mistakes of the outgoing Biden administration (and Gary Gensler) in relation to cryptocurrency regulation. FIT21 law, which got bipartisan support of Congress was never passed. Without normal regulation of cryptocurrencies, the U.S. simply gives its position on the cryptomarket to other countries.

Conclusion

The need to pass new crypto billsis long overdue and lawmakers realize it, its main opponent - Gary Gensler is likely to resign from his post even if Harris wins the election. However, now Republicans and Trump have a more definite position on this issue - as a party traditionally more loyal to business and investors.

The approval of the Bitcoin Strategic Reserve Act will be big and important news for the cryptocurrency investment market and will definitely be one of the actions of the new Trump administration. However, for ordinary Americans, it is equally important that the FIT21 Act and Stablecoin Act will finally pass.

Since many Democrats already supported it also has potential to be approved. Whatever the result of the presidential election, the passage of laws depends on the election of the House of Representatives and the Senate too.

If you are interested in getting more crypto insights, you can watch the global crypto regulation rating here and get updates on my X account.