In mid-December, two jubilant groups came together to celebrate their recent, interconnected turns in fortune: the cryptocurrency industry and the family of the victorious US president-elect, Donald Trump. Eric Trump, the second son of the president-elect, was the star attraction at the Bitcoin Mena 2024 conference in Abu Dhabi on December 10. Speaking to a cheering crowd of industry figures, Eric Trump assured them that his father would be “the most pro-crypto president” yet. He connected the movements, suggesting that both were victims of the same establishment. “The nastiness in the system…guys, they made our life miserable,” he said, referring to the US government. “But had it not been for those attacks, I don’t think my eyes would have been as open to the crypto industry…I saw them come after you. I saw them strip your bank accounts.”
The outlook for cryptocurrency looks significantly brighter with Trump’s second term, which promises to take the industry out of the shadows and into the mainstream. According to a report by the Financial Times, the shift is expected to come with far less regulatory scrutiny than the industry has faced in recent years. The industry believes that under Trump — whose family has a personal stake in crypto through its platform World Liberty Financial — and a Republican-controlled Congress, a new golden era for crypto is on the horizon.
On the campaign trail, Trump promised to create a strategic bitcoin stockpile, effectively turning it into a reserve asset, and pledged to install a crypto advisory council. Additionally, he nominated Paul Atkins, a pro-crypto businessman, to head the Securities and Exchange Commission (SEC). Eric Trump shared his excitement over the growth of bitcoin, calling his father when the cryptocurrency first crossed the $100,000 threshold. In Dubai, the milestone was celebrated with a yellow Lamborghini cruising the streets, its bonnet spray-painted with the words: “BTC 100K THANKS TRUMP.”
Crypto owners, like 26-year-old Austrian Didi Steiner, are euphoric over Trump’s plans to consider bitcoin as a reserve asset. Steiner believes that if nations and companies start to pile into bitcoin, the resulting buying pressure could be immense. “With Trump, we come many steps closer,” he said, donning a red “MAKE BITCOIN GREAT AGAIN” cap under the Abu Dhabi sun.
The industry’s revival is striking, considering the downturn only two years ago, when the collapse of Sam Bankman-Fried’s exchange FTX led to a global crisis and sent bitcoin’s price crashing to just $16,000. “This is a turnaround of near-mythical proportions, miraculous proportions, and really not something that could ever have been contemplated, even at the start of this year,” says Yesha Yadav, associate dean at Vanderbilt University Law School, as reported by the Financial Times.
A more crypto-friendly administration could usher in record inflows, more deals, and institutional money, as traditional financial players become less fearful of regulatory crackdowns. Yet, the crypto industry has a well-documented history of attracting criminals and facilitating scams. Many executives have faced civil charges or jail time in recent years. As the industry gains a more significant foothold in Washington, the concern is that both ordinary and institutional investors may again face risks of significant losses.
The crypto sector felt vilified under President Joe Biden’s administration, particularly under the leadership of SEC Chairman Gary Gensler. Gensler’s SEC launched a series of lawsuits against major crypto companies, accusing them of violating regulations governing the sale of securities. According to FT sources, this scrutiny will come to an abrupt end under the incoming Trump administration. “That kind of stuff is going to come to a screeching halt,” says Coy Garrison, a partner at Steptoe and former SEC counsel.
This shift in Washington’s stance is already having an impact. Bill Hughes, senior counsel at ConsenSys, noted that the tone has already changed within the SEC. “The last administration took a scorched-earth position with respect to crypto,” he said, adding that Trump’s election marks a transition “from the very antagonistic way things are now to a coherent, pro-market stance.”
Crypto executives have been quick to align themselves with Trump’s camp, with figures like Kris Marszalek, CEO of exchange Crypto.com, meeting the president-elect in Florida. Trump’s inner circle, many of whom are crypto advocates, has also contributed to the optimism. Paul Atkins, nominated for SEC chair, has supported digital asset-friendly regulations for years, and Howard Lutnick, Trump’s pick for commerce secretary, has close ties to Tether, a major player in the stablecoin market. Elon Musk, another Trump confidant, is poised to run a new advisory group focused on government efficiency, which has raised eyebrows among crypto enthusiasts, given Musk’s long-standing advocacy for digital currencies.
Crypto’s shift into the mainstream has been driven by an extensive lobbying effort, with key players spending hundreds of millions of dollars to secure pro-crypto politicians. Venture capital firms such as Andreessen Horowitz and Sequoia Capital, along with crypto companies like Kraken and Gemini, have been heavily involved in this push. The success of these efforts is reflected in the growing number of pro-crypto politicians in Congress, as well as the work of groups like Fairshake, which raised over $170 million to support pro-crypto candidates, according to FT.
Looking ahead, crypto executives are keen to secure favorable regulatory actions. They hope to see clearer definitions of which cryptocurrencies are considered securities and more rules that allow for streamlined operations. One key issue is the repeal of SAB 121, an accounting rule that mandates institutions holding digital tokens for customers to treat them as liabilities. Advocates believe that repealing this rule will encourage Wall Street firms to start holding digital assets, which could significantly boost crypto adoption.
The incoming administration is also expected to address the regulatory framework for stablecoins, which have grown into a $200 billion market. With Europe’s regulatory push on digital currencies, including stablecoins, crypto executives are keen to ensure that the US doesn’t fall behind in providing legal clarity.
The growing acceptance of crypto on Wall Street has already begun, with the SEC approving bitcoin and ether exchange-traded funds (ETFs). The largest, BlackRock’s bitcoin fund, has amassed nearly $60 billion in assets, and institutional investors are starting to dip their toes into the market. This growing institutional involvement could push crypto prices even higher.
However, this increasing institutional interest is not without risks. Experts have expressed concerns about the volatility of crypto and its potential to destabilize financial markets. With the crypto industry becoming more intertwined with traditional financial systems, any significant downturn could have broader consequences, particularly for institutional investors.
The mainstreaming of crypto raises questions about the future of the industry. Once an alternative financial system outside the government’s purview, cryptocurrency is now increasingly accepted by the US government, which has led some to question the irony of this transformation. As noted by FT, there’s a massive irony in it, as the very establishment that crypto once sought to evade is now the driving force behind its potential rise.
