President-elect Donald Trump is scheduled to be inaugurated on Monday, January 20, 2025. I discussed the impact of the election in a blog on Coindesk, where I predicted that “Positive tailwinds in crypto caused by the election itself may not be as sticky in a month. However, the ramifications of a unified Republican House and Senate majority may mean a more productive government, and one that passes more legislation surrounding crypto.”
In this blog, I focus more on the legislative environment with tailwinds pre-inauguration followed by policy opportunities post-inauguration.
Pre-Inauguration:
Before the election, the Blockchain Association’s polling found that “Two-fifths of Crypto-Positive voters [in swing states] say crypto is a major issue for them in the election; half pay attention to candidates’ crypto stances.” . In this election, the crypto voting bloc has proven itself to be a credible group to court.
Large crypto-focused PACs also emerged to fund candidates, like Protect Progress ($37M), Fairshake ($227M), and Defend American Jobs ($59M).
Cabinet and Staff Picks
Trump has been announcing staff picks and Cabinet picks (who still need to be confirmed), many of which are pro-crypto. Here are some of the most notable.
Paul Atkins (SEC commissioner from 2002 to 2008) was selected to be the new SEC chair. He is an advisor to the Chamber of Digital Commerce, an institution focused on promoting the acceptance of crypto.
Trump’s new Department of Government Efficiency (DOGE) is to be led by Elon Musk and entrepreneur Vivek Ramaswamy. Trump announced that they would “dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies”. Given Musk’s advocacy for crypto, like Dogecoin, he may well use his platform to publicly support crypto. For example, he recently posted on X that “If dollar inflation is solved, the price in dollars to buy cryptocurrency will actually drop, other things being equal.”
The Commerce Secretary pick, Howard Lutnick, is pro-crypto. At the Bitcoin 2024 conference in Nashville, he said “Bitcoin is like gold and should be free trade everywhere in the world.”
Labor Secretary pick Rep. Lori Chavez-DeRemer of Oregon voted for the SAB 121 House Joint Resolution and FIT 21. She stated that she’s “talked to several leaders in this space that welcome safe regulations & oversight to help legitimize the industry mainstream.”
Many of Trump’s supporters in government are pro-crypto, like RFK Junior, JD Vance, and Michael Walz. They have supported bills like FIT21 and SAB 121, for example.
For the first time, the US president appointed an “AI & crypto czar”. Czars are typically industry veterans that directly work with the executive branch to oversee a specific mandate and do not require Senate approval. Trump named David Sacks, a tech investor and former CEO of Yammer and COO of PayPal, to serve as the “AI & crypto czar.”. In Trump’s announcement, he said that “[David Sacks] will work on a legal framework so the Crypto industry has the clarity it has been asking for.”
Inauguration Fund
The Inauguration Fund is money raised to cover the expenses associated with the inauguration (other than the security costs and official swearing-in event, which are publicly funded). This includes inaugural balls, receptions, and parades. These are largely donations made by corporations and wealthy corporations to cozy up to the incoming administration. Trump raised $107 million in 2017, Biden raised $62 million in 2021, and Trump has raised more than $200 million this time around. In fact, interest is so high that there are reports of six-figure donors being turned away.
Crypto companies top the donors list. Microsoft donated $1 million to the fund, overshadowed by Ripple donating $5 million worth of XRP, Robinhood donating $2 million, plus Coinbase, Circle, Kraken, and Ondo each donating $1 million.
Additionally, the very first “Crypto Ball” is being held by David Sacks (prev Paypal exec and Trump’s AI and Crypto Czar) January 17 (before the inauguration). The event is presented by big names in the crypto space like BTC Inc (a Bitcoin magazine), Stand With Crypto (a crypto advocacy group), Coinbase, Galaxy, Sui, Metamask, Ondo, Solana, Uniswap labs, and many more.
Post-Inauguration:
Many of the cabinet picks are replacing significantly less crypto-friendly members. Notably, Gary Gensler, the departing SEC chair, is heavily anti-crypto. In just 2024, the SEC sent Wells Notices to Coinbase, Uniswap Labs, Consensys, Robinhood Crypto, OpenSea, Crypto.com, among others. In June 2023, the SEC sued Coinbase, alleging that it was an unregistered broker (from its staking features). The case is slowly progressing, with discovery happening in early 2025. The SEC also successfully sued Ripple Labs $125M for allegedly using XRP as an unregistered security to raise funds.
The incoming SEC chair could influence the direction the Wells Notice investigations go, as well as the lawsuits. They could also be retracted. The SEC also has a role in approving ETFs, meaning it could expedite crypto ETFs which would further connect TradFi with DeFi. Bitcoin ETFs brought $31 billion in net inflows with over $100 billion under management, making them the most successful ETF launches ever.
The SEC Custody Rule requires assets held by a private fund to be maintained with a qualified custodian. Currently, it is legally unclear what would break this rule, which legislation could fix.
The SEC’s SAB 121 which makes financial institutions report crypto assets as a liability (which makes it difficult to hold customers’ crypto), may finally be altered with bipartisan support.
Many crypto companies have chosen to invest and expand features outside of the US in fear of a Wells Notice or other legal troubles. Ever since the election and anticipation of a winding down of SEC enforcement, many crypto companies have started proposing fee-switches (staking features) hoping that they would not receive a Wells Notice. Clarifying the SEC’s position on these points would not only support the US crypto market and create jobs, but would allow US firms to lead global crypto innovation once again. Right now, 93% of the crypto market cap is outside of the US.
The CFTC chair, Rostin Behnam, recently announced that he was leaving, opening the opportunity for Trump to nominate a pro-crypto chair. Perhaps, discussion could evolve into some parts of crypto being classified as commodities.
Trump also plans to create a Crypto Advisory Council, with 24 CEOs and founders in the industry who would help tailor policy in this space.
Legislation
Significantly more pro-crypto than anti-crypto representatives across both sides of the aisle have been elected (266 vs. 120 in the house, 18 vs. 12 in the senate). This opens many opportunities for legislative changes to how crypto is legally treated.
Currently, Crypto-to-Crypto swaps are taxed (capital gains), as well as crypto earned through mining, staking, and airdrops. Crypto used to pay for goods is also taxed and treated as an off-boarding event (capital gains). This means that a single individual buying crypto, swapping to another token, swapping back, and selling on an exchange could be taxed 3 times. The government can introduce legislation to change the tax law.
Recently, the IRS ruled that frontends are brokers, requiring them to provide information regarding taxpayers involved in the transactions. The Trump administration could revoke this.
Trump has also talked about creating a Bitcoin reserve, where the government would hold onto any Bitcoin seized instead of selling. In fact, the US government already holds 1% of the world's Bitcoin (16 billion Bitcoins!). The government could also actively buy cryptocurrencies. This would require legislation but would legitimize crypto in the US.
Trump could also use presidential pardons on crypto KOL’s. He previously said that “If you vote for me, on Day One, I will commute the sentence of Ross Ulbricht,” the founder of Silk Road.
There is still much regulatory clarity needed in gray areas surrounding specifics like DAO’s (including liability), stablecoins, and fee-switches.
I am very optimistic and believe that there will be significant changes to the crypto regulatory environment in 2025 and beyond. The government has set the industry up for success, by setting up councils to bridge industry leaders to political leaders. I am excited for the US crypto market to grow this year and once again lead innovation in blockchain technology.
- Paul Veradittakit
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ABOUT ME
Hi, I’m Paul Veradittakit, a Managing Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. I’ve been in the industry since 2014, and the firm invests in equity, early stage token projects, and liquid cryptocurrencies on exchanges. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.