Over the last weeks, a series of events and announcements have shaken up the crypto market in the US. From SEC (US Securities and Exchange Commission) case dismissals to the creation of a US Crypto Reserve, the Trump administration has quickly signalled
a 180 turn on the handling of cryptocurrencies.
Even before his inauguration, President Trump was expected to designating cryptocurrency a national priority and ease regulatory restrictions. The crypto-friendly shift was to be expected, with prominent crypto firms
donating to Trump’s inaugural fund, such as
Ripple ($5 million), Robinhood ($2 million), Coinbase and Kraken ($1 million each). The inauguration additionally featured a
crypto ball, where the industry celebrated the President’s pro-crypto agenda and plans to position the US as a leader in blockchain.
Shortly after, Trump announced the creation of his
own meme coin, $Trump, which reached a total value of over $14bn shortly after its launch. Just a few weeks after the release, the SEC
released a statement, clarifying that meme coins are not considered securities. In practice, this means that transactions involving meme coins do not fall under the same regulatory protections as traditional securities and do not require SEC registration
under the Securities Act of 1933.
Paving the way for de-regulation, the SEC has since continued to ease up on the crypto scrutiny that was run by the previous SEC leadership under the Biden administration. Over the last couple of weeks, the SEC has started to reset its relationship with
the crypto industry.
The SEC has dropped the following crypto-related investigations so far this year:
- 24 February: Dropped
Coinbase enforcement case. The SEC sued Coinbase in 2023 for operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and making “billions of dollars unlawfully" through the buying and selling
of crypto asset securities.
- 24 February: Dropped
OpenSea investigation, alleging the platform may have been operating as an unregistered securities marketplace.
- 25 February: Dropped the
Robinhood crypto investigation.
- 26 February: Dropped
Uniswap Labs case, accused of operating as an unregistered broker exchange and clearing agency and of issuing unregistered securities.
- 27 February: Dropped
Gemini investigation, accused of selling unregistered securities.
- 3 March: Agreed to dismiss
lawsuit against Kraken, accused of making “hundreds of millions of dollars arranging purchases and sales of 11 crypto assets while turning a blind eye to securities laws.”
Along similar lines, in 2023, crypto entrepreneur Justin Sun and his companies (Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc., formerly BitTorrent)
have been charged by the SEC for fraud and other securities law violations. After investing $75 million into the Trump family-backed World Liberty Financial crypto project, his SEC charges have now been
put on hold as well.
Similar to $Trump, the
World Liberty Financial crypto project is the Trump’s new crypto platform, in which the President holds a financial stake. And just this weekend, on 2 March, Trump and World Liberty Financial announced the creation of a
US Crypto Reserve.
The reserve will hold five cryptocurrencies, namely bitcoin, ether, XRP, Solana’s SOL token, and Cardano’s ADA, and the announcement initially boosted the prices of Bitcoin by over 10%, Ethereum by over 13%, and the other mentioned digital assets by at least
20%.
However, reaction among the industry was more divided, with even strident supporters of Trump’s crypto approach voicing criticism. Billionaire bitcoin investor Tyler Winklevoss
wrote on X: “I have nothing against XRP, SOL, or ADA but I do not think they are suitable for a Strategic Reserve. Only one digital asset in the world right now meets the bar and that digital asset is bitcoin."
David Marcus, the former head of Facebook’s failed crypto project, reposted Winklevoss
and added: “Most—if not all—of the non-conflicted industry leaders are agreeing about this.”
While crypto prices had initially soared after the announcement, 24 hours later, this trend
reversed. Bitcoin dropped 9%, ether slid 15%, and XRP and SOL fell even more.
Where will this whirlwind take US crypto regulation?
The move away from crypto regulation is evident, both in the President’s actions as well as in the SEC’s dismissal of cases. Yet while the actions are beneficial toward the overall development of the crypto industry, the potential conflict of interest cannot
be overlooked.
The SEC dropping investigations along with the president’s release of his own crypto platform and meme coin that stand to benefit himself and his family personally stand in direct conflict with his
prohibition for government agencies to undertake any action to establish, issue, or promote CBDCs.
The private-sector over public-sector preference has long been established, both in Trump’s first presidency and the few months of his second. The aftermath of the ongoing de-regulation of cryptocurrencies as well as the creation of a the US Crypto Reserve
remains to be seen as we wait for the ripple effects of his first tumultuous months in office.