Regulation
Cryptocurrency titans bet on Donald Trump’s victory to overhaul SEC
As the 2024 U.S. presidential election approaches, cryptocurrency leaders are anticipating significant changes in regulatory oversight if Donald Trump returns to the White House. The cryptocurrency industry is dissatisfied with the current administration’s tough approach led by the Securities and Exchange Commission (SEC) under Chairman Gary Gensler. This has raised hopes among cryptocurrency advocates that a Trump presidency could usher in a more lenient regulatory environment.
How Donald Trump’s Victory Could Reshape Cryptocurrency Regulation
Michael Selig, a partner at Willkie Farr & Gallagher LLP, suggests that a Trump administration could “reset and rethink the SEC’s cryptocurrency regulatory policy.” It could potentially undo ongoing enforcement actions and investigations launched during the Biden administration. This sentiment reflects a broader expectation within the cryptocurrency community that Trump’s return could lead to a reduction in regulatory pressure.
Under President Joe Biden, the SEC has stepped up its scrutiny of the cryptocurrency industry, especially after the collapse of the FTX exchange in late 2022. The regulator has taken numerous enforcement actions against exchanges and broker-dealers, accusing them of violating securities laws.
Gensler argued that many cryptocurrencies qualify as securities and should therefore adhere to SEC registration requirements. This position has sparked controversy within the industry.
Despite some agreements, there are important disputes underway involving important players such as RippleCoinbase, Kraken, and Binance remains unresolved. The SEC also recently closed investigations into Ethereum and Binance USD (BUSD), a USD-backed stablecoin issued by Paxos. However, debate over whether specific tokens are classified as securities persists.
A critical case is the SEC’s lawsuit against Ripple Labs Inc., which alleges that Ripple conducted an unregistered securities offering through the sale of XRP tokens, raising over $1.3 billion.
Although a federal judge ruled last July that XRP sales to retail investors were not investment contracts, the outcome of the case remains uncertain. However, Ripple CEO Brad Garlinghouse recently indicated that a resolution may be imminent. He noted, “We expect a resolution very soon.”
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SEC Reform After Trump’s Victory?
The prospect of Donald TrumpThe victory has fueled speculation about a possible shakeup at the SEC. Austin Campbell, a blockchain consultant and associate professor at Columbia Business School, noted that a new administration could quickly shake up the SEC’s leadership.
“Remember, if Trump is elected, Republicans can immediately change who is president,” Campbell said. He predicts that change could lead to the resolution of many current cases, potentially ending the “highly variable decisions that are adding to the confusion.”
But some experts caution against assuming a Trump presidency would automatically lead to a dramatic shift in enforcement practices. Emily Meyers, general counsel at venture capital firm Electric Capital, says securities enforcement cases are typically “apolitical” and not subject to significant staff turnover with policy changes.
“It’s unlikely that any pending cases will be abandoned, especially those that have already been argued in federal court,” Meyers added, according to a Bloomberg report. Instead, he suggests that a new administration could focus on different types of enforcement cases rather than dismissing existing ones.
Will Hester Pierce Replace Gary Gensler?
Likewise, Ji Kim, the legal and policy director at the Crypto Council for Innovation, chimed in. He believes that while Donald Trump’s administration could alter the regulatory landscape, those changes would depend on the new leadership and makeup of the SEC commissioners.
“If President Trump is re-elected and Chairman Gensler resigns, we could see the current norm of enforcement change,” Kim said. He added, “However, that would depend on the leadership and composition of the commissioners; nothing is guaranteed.”
Meanwhile, Representative French Hill believes that SEC Commissioner Hester Pierce could replace Gary Gensler after Trump’s victory. In a recent interview, the SEC Commissioner noted, “If the chairman changes, the SEC chairman will typically change in response.” However, Pierce refrained from making any predictions about who would succeed Gensler.
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