Viewpoint by: Ross Shemeliak, co-founder and chief operating officer of Stobox
After the return of US President Donald Trump, Coinbase witnessed the Securities and Exchange Commission relinquish its 2023 lawsuit, along with the closure of Robinhood Crypto’s investigation. On February 25, the SEC similarly terminated its federal investigation into Uniswap Labs, leading to market declines affecting both Coinbase and Bitcoin (BTC), with Bitcoin plummeting from its $109,114 zenith to $87,000, indicating a substantial 20% decline. Although no clear reasons are evident, the overall rationale behind investor behavior is logical: they are typically averse to unpredictability and tend to prioritize market conditions over individual companies.
The more significant aspect of the SEC dismissing these cases lies in what it reveals about Trump’s presidency and cryptocurrency. The fact that the Trump administration has received cryptocurrency contributions is not beneficial. Recall that both Coinbase and Robinhood have contributed to Trump, with Uniswap also joining in a cryptocurrency super PAC, Fairshake, totaling $116 million.
Does this imply to investors that the contributions were accepted, or is it merely coincidental? Is this an enthusiastic reception from Washington for cryptocurrency at large? Thankfully, there exists a litmus test to ascertain where the Trump presidency stands on cryptocurrency, which the sector may greatly welcome. If his administration undertakes three actions, it could indicate that they appreciate cryptocurrency and are concerned about the market.
Allocation of CFTC by the regulator or a change in the SEC’s stance on token securities
The stance of the SEC regarding token securities is crucial, as the commission has conveyed its intention to classify most tokens as securities under past leadership. Such classification implies potential liability: Even if one is not directly issuing tokens but only developing a technical solution that interacts with or trades tokens, there could be complications — ongoing legal risks related to possible involvement with unregistered securities. This continual hurdle remains significant for the crypto sector.
Change could also come from the Commodity Futures Trading Commission (CFTC). Historically, a company’s performance has greatly influenced a token’s value, and its classification as a security often did not lie with the company itself. However, if the CFTC eases restrictions, there could be notable consequences for enterprises in the US, making them more inclined to engage with cryptocurrencies. Any initiatives by the CFTC will be watched closely.
Latest: SEC dismisses the lawsuit against crypto exchange Coinbase
At present, the CFTC lacks authority over crypto or any such jurisdiction. The transfer of regulatory powers over cryptocurrency to the CFTC will signal a strong pro-crypto orientation from the new administration. As a smaller and less aggressive regulator, the CFTC is significantly less likely to pursue regulation through enforcement, suggesting a more cooperative approach toward the sector. Any such development could greatly reduce a key risk that US cryptocurrency companies face, thereby opening the gates for a wave of innovative crypto ventures entering the profitable US market.
Acceptance of stablecoins
The embrace of stablecoins is anticipated to enhance the growth of crypto payments, particularly aiding small and medium enterprises (SMEs). SMEs that embark on utilizing crypto payments typically opt for stablecoins first, necessitating a clear understanding of the legal framework surrounding stablecoins. It isn’t sufficient to rely on vague legislation not intended for stablecoins. Instead, a well-defined structure is essential for regulatory clarity.
What ensues from improved regulatory practices? Increased confidence. Companies will benefit from enhanced certainty during the transition from stablecoin to cryptocurrency. Crucially, as more firms incorporate crypto payments, additional opportunities will surface for US cryptocurrency companies. To promote this advantageous cycle, a dedicated legislative framework recognizing stablecoins as legitimate payment methods is required. Direct regulatory oversight, ensuring trust in reserves, and managing risks for stablecoin issuers will also enhance confidence.
FinCEN’s responsibility in banking crypto assets
Another significant hurdle involves the difficulties crypto firms encounter when establishing bank accounts. Even when successful, they often face elevated service charges and fees, as banks perceive substantial money laundering threats in the crypto domain. This hesitation to serve crypto is paradoxical: The industry seeks to create an alternative payment system while remaining dependent on conventional banking.
For the cryptocurrency ecosystem to flourish, financial institutions must begin offering services to crypto-related entities. It’s evident that progress will be restricted without traditional banks’ involvement. The key to transformation could reside with the Financial Crimes Enforcement Network (FinCEN). If this agency undertakes measures to reassess its risk evaluation for crypto enterprises, banks will modify their assessments accordingly. Financial institutions will become more inclined to collaborate with crypto companies.
The future path of crypto
The trajectory of crypto in the US is far from certain: The Trump administration accepted specific cryptocurrency contributions, yet ongoing uncertainty pervades the markets. By monitoring the actions of the CFTC and FinCEN, alongside favorable developments in cryptocurrency regulation, a clearer perspective on this government’s stance towards the sector may emerge. Always challenging to discern, these three domains could offer insights into the Trump administration’s genuine intentions regarding crypto regulation in the United States.
Viewpoint by: Ross Shemeliak, co-founder and chief operating officer of Stobox.
This article is intended for general informational purposes and should not be construed as legal or investment counsel. The opinions, thoughts, and views articulated herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
