This article aims to explore the potential changes in cryptocurrency regulation following Trump's re-election, as well as the profound impacts these changes may have on the cryptocurrency market and the global financial system.
Written by: Mao Jiehao, Xu Jiayao
In November 2024, Donald Trump was re-elected as the 47th President of the United States with an overwhelming advantage in the presidential election. This victory not only marks a significant milestone in his personal political career but also brings major shifts to the future possibilities of U.S. cryptocurrency policy.
During his campaign, Trump showed unprecedented support for cryptocurrency. He promised to make the U.S. the "global cryptocurrency capital" and proposed a series of policies aimed at promoting the development of cryptocurrency. This brought new hope to the cryptocurrency industry and sparked widespread discussion.
What changes might occur in U.S. cryptocurrency policy with Trump's re-election? Under his leadership, can a more relaxed and innovative regulatory environment truly be created for the cryptocurrency market? This article aims to explore the potential changes in cryptocurrency regulation following Trump's re-election, as well as the profound impacts these changes may have on the cryptocurrency market and the global financial system.
Trump's Historical Views and Policy Shifts on Cryptocurrency
1. Cryptocurrency Policy During Trump's First Term
Trump's attitude towards cryptocurrency during his first term was quite conservative, even negative.
As early as 2019, he publicly criticized digital currencies like Bitcoin, claiming they "lack intrinsic value" and that their extreme volatility could provide a breeding ground for illegal activities. Trump specifically warned that virtual currencies could facilitate crimes such as money laundering and fraud.
Under Trump's administration, the U.S. government strengthened its regulation of cryptocurrency, particularly regarding initial coin offerings (ICOs), and both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) increased their oversight of crypto assets.
2. Trump's Cryptocurrency Promises in the 2024 Campaign
However, entering 2024, Trump's stance underwent a significant shift. During the campaign, he openly expressed support for cryptocurrency and proposed the following policy initiatives:
Striving to make the U.S. the "global cryptocurrency capital" by implementing measures to ease regulation and promote technological innovation.
Encouraging the expansion of the cryptocurrency industry and boosting the market value of digital currencies like Bitcoin.
Defending the rights of Bitcoin mining, believing it not only aids the development of cryptocurrency but also promotes innovation and growth in the energy sector.
Firmly opposing the issuance of central bank digital currencies (CBDCs), arguing that it would lead to excessive monitoring of citizens' financial activities and infringe on personal privacy.
Establishing a dedicated cryptocurrency advisory committee responsible for formulating and implementing favorable policies.
Dismissing the current SEC chairman to increase support for the cryptocurrency industry.
Proposing the establishment of a "national Bitcoin reserve," holding Bitcoin as a strategic reserve to leverage its appreciation potential.
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Reactions from the Cryptocurrency Market
1. Initial Reactions from the Cryptocurrency Market
According to statistics, the cryptocurrency industry raised over $245 million during the 2024 election, primarily to support candidates who advocate for cryptocurrency. This influx of funds not only reflects the industry's political influence but also brings new ideas for Trump's camp regarding cryptocurrency policy. Trump incorporated his support for cryptocurrency into his campaign strategy, aiming to attract young voters and investors. This strategy not only enhanced his influence within the Republican Party but also allowed him to leverage the substantial political donations provided by the cryptocurrency industry to strengthen his campaign.
Trump's re-election triggered a strong market reaction. Market sentiment generally believes that the Trump administration will create a more favorable regulatory environment for the cryptocurrency industry. This change indicates that investors are confident in the expectations of Trump's policies, believing that this policy shift will bring new development opportunities for the industry.
2. Perspectives from Industry Insiders
Industry insiders generally believe that Trump's support for cryptocurrency may promote further development of the U.S. cryptocurrency market and enhance the country's position in the global cryptocurrency competition. Some industry experts point out that Trump's proposed policies to ease regulatory burdens and promote technological innovation will provide a more relaxed environment for cryptocurrency mining, blockchain technology, and other sectors.
However, some analysts warn that Trump's cryptocurrency policies may face legal and regulatory challenges, particularly in balancing market innovation with financial security. Despite Trump's election victory, there remains significant division in American society. The Trump administration may face strong opposition from Democrats and other interest groups, which could impact its efforts to advance cryptocurrency policies. The interplay between the government, traditional finance, and the cryptocurrency market will become an important topic in the coming years.
Potential Challenges and Controversies
Legal and Regulatory Challenges in Policy Implementation
Although Trump's proposed cryptocurrency policies are full of potential, their implementation may face numerous legal and regulatory challenges.
First, the proposed "national Bitcoin reserve" may conflict with existing fiscal policies and the financial system. Whether the U.S. Treasury can increase reserves by purchasing Bitcoin still requires Congressional approval.
At the same time, the Federal Reserve's opposition to such policies could become a significant obstacle to advancing them. Federal Reserve Chairman Jerome Powell has publicly stated that the Fed has no intention of participating in a government plan to hoard Bitcoin, and this stance may affect the Trump administration's actual actions in the cryptocurrency space. Nevertheless, Trump may still push for the Bitcoin reserve plan through other means. For example, the Trump administration could issue an executive order directing the Treasury to use the Exchange Stabilization Fund (ESF) to directly purchase Bitcoin, thereby bypassing Congressional approval.
Additionally, Trump's plan to significantly promote the development of the cryptocurrency industry, particularly in terms of financial regulation innovation, poses a huge challenge in coordinating within the existing legal framework in the U.S. The interests of traditional financial institutions, regulatory bodies, and the cryptocurrency industry will complicate the advancement of these policies.
Sustainability of Trump's Policies and Social Reactions
While Trump's stance on cryptocurrency has garnered some market support, it has also sparked widespread social controversy.
Many Democrats and regulatory bodies believe that Trump's policies could exacerbate instability in financial markets and increase systemic risk. Especially against the backdrop of the extreme price volatility of cryptocurrencies like Bitcoin, government hoarding of Bitcoin could raise concerns about financial security.
Some critics argue that Trump's support for cryptocurrency is more about catering to industry moguls as a political bargaining chip, and there are doubts about whether his policies can be effectively implemented. Industry experts indicate that while Trump's policies are full of imaginative potential, ensuring market fairness, investor protection, and financial system stability will be significant issues in practical operations.
Furthermore, the Trump administration may face pressure from the international community, especially in the context of increasingly stringent global financial regulatory frameworks. Whether the U.S. can maintain its pace of innovation while strengthening regulation remains a focal point of close attention in the global financial market.
Currently, various states in the U.S. are seizing the opportunity, igniting a legislative wave for Bitcoin reserves. Pennsylvania has taken the lead in proposing a strategic Bitcoin reserve bill, becoming the first state in the U.S. to promote this plan at the state level. On December 12, 2024, Texas proposed legislation to establish a strategic Bitcoin reserve by accepting taxes, fees, and donations in Bitcoin, committing to hold these Bitcoins for at least five years. The Texas proposal may pave the way for a future national strategic Bitcoin reserve plan. Other states are also following suit, with Oklahoma and others passing laws to protect Bitcoin-related rights. One of the drafters of the Texas bill, Porter, stated that up to 10 states and 4 countries are currently discussing similar legislation. Oklahoma, Louisiana, Montana, and Arkansas have passed laws protecting the rights to Bitcoin mining, self-custody, running nodes, and peer-to-peer trading.
Summary by Lawyer Mankun
Trump's re-election as president brings new opportunities for U.S. cryptocurrency policy, accompanied by a series of uncertainties.
His policy commitments and market reactions indicate that the cryptocurrency industry will welcome new development opportunities in the coming years, particularly in regulatory arrangements and promoting technological innovation. However, all of this remains fraught with risks and challenges, especially regarding the legal, regulatory, and complex factors of the international financial system that may arise during policy implementation. Investors need to approach this with caution, and the cryptocurrency industry must continuously adjust its development strategies in response to policy changes.
In the future, whether the Trump administration's policies in the cryptocurrency field can become a reality will largely depend on the legislative process in Congress, the interplay of various interests, and changes in the global economic environment. Regardless, the future of the cryptocurrency industry will undoubtedly be filled with volatility and opportunities, warranting our continued attention.
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