As Inauguration Day approaches in the U.S., the potential shift in the regulatory landscape for cryptocurrencies becomes more apparent. While many in the crypto industry may look to the White House for significant changes, the most impactful actions are likely to take place within regulatory agencies tasked with overseeing financial markets.
When President-elect Donald Trump takes office, one of the anticipated executive orders he may issue pertains to cryptocurrency regulation. However, as history has shown, such orders can often lack substantive change, illustrated by President Joe Biden’s 2022 directive aimed at developing a coherent strategy for digital assets.
Crucially, while presidential directives can shape the discourse, it is at agencies like the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) where real regulatory modifications will occur. These agencies may seem independent, but under new leadership aligned with Trump’s policy perspectives, we can expect a new wave of regulation.
Former SEC Commissioner Paul Atkins is slated to receive a nomination to lead the agency, but his confirmation may experience delays amid a backlog of appointments. As the commission starts with just three members—two Republicans and one Democrat—there is speculation around which Republican will serve as the acting chair. Options include Mark Uyeda or Hester Peirce, both of whom have shown inclination toward scaling back burdens on crypto activities.
Uyeda’s potential elevation to acting chair could allow for immediate changes, such as the withdrawal of Staff Accounting Bulletin No. 121 (SAB 121), which imposes challenging accounting requirements on banks holding customer crypto assets. The removal of SAB 121 could ease restrictions on banking involvement in the crypto sector and usher in a more accommodating environment.
Hester Peirce, also well-versed in the crypto landscape, has expressed opposition to SAB 121, arguing that it does not reflect the true nature of risks posed by the regulation. Should she assume the chair, she may similarly move to abolish this bulletin, fostering a friendlier regulatory atmosphere for cryptocurrency.
Moreover, Congressional efforts to repeal SAB 121 met resistance from Biden, who exercised veto power to safeguard the controversial accounting standard. With the departure of key figures at the SEC, including chief accountant Paul Munter, the incoming leadership could redefine the agency’s approach to crypto accounting.
The FDIC may also be on the brink of significant changes. With Martin Gruenberg’s anticipated exit before the inauguration, Vice Chairman Travis Hill is poised to lead the agency temporarily. Hill has indicated a desire to clarify that banks can engage with cryptocurrencies without a convoluted approval process, thus promoting a more innovative and transparent regulatory framework.
The shifts in leadership extend to the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, both of which have a vested interest in shaping the future of crypto banking. The OCC has been operating under an acting administrator, but the arrival of a politically aligned nominee could encourage a more progressive stance for crypto engagements.
At the Federal Reserve, the impending departure of Vice Chairman for Supervision Michael Barr opens up possibilities for a successor who may advocate for increased engagement of banks in the crypto arena.
This changing landscape positions the regulatory framework for crypto banking at a critical juncture. As older administration officials exit, the door opens for more progressive policies that could redefine banking relationships with cryptocurrencies. While optimism exists about potential advancements, it is essential to remain cautious, as any plans may be challenged by unforeseen developments.
As we move further into this new era, the focus will not only be on initial responses from the regulatory bodies but also on the sustained evolution of policies that can either hinder or propel the cryptocurrency industry forward.
