Crypto investors are certainly having a moment. While Bitcoin (BTC 0.14%), the world's largest cryptocurrency, has performed well all year, the rest of the crypto-verse has President-elect Donald Trump to thank. Crypto prices started moving significantly higher in the weeks leading up to the election, as the betting odds favored Trump winning the election.
However, Trump's ultimate win set off a wave of buying that sent everything from Bitcoin to meme tokens like Dogecoin (DOGE 0.80%) to other tokens that have struggled like XRP (XRP -0.41%) soaring. The good news keeps coming for crypto, and Trump is poised to make this holiday season extra special for Bitcoin and the rest of the crypto-verse. Here's why.
The regulatory environment gets better every day
Trump vowed to take care of crypto stakeholders if they supported him in the election, and so far he's lived up to that promise. During the campaign, Trump said he would fire Gary Gensler, chair of the Securities and Exchange Commission (SEC), on day one if elected. It won't come to that because Gensler has already said he will step down once Trump takes office.
The crypto community and Gensler have had a thorny relationship. In 2020, the SEC sued Ripple, the company behind XRP, and its founders Brad Garlinghouse and Christian Larsen, for selling XRP as an unregistered security in 2013. The lawsuit represented an early battle between the crypto community and the SEC because the agency wanted regulatory jurisdiction over many cryptocurrencies like XRP, while crypto stakeholders preferred to deal with other regulators. Ripple, Garlinghouse, and Larsen initially triumphed in the case but then the SEC appealed parts of the judge's decision.
In March 2022, Gensler and the SEC instituted Staff Accounting Bulletin (SAB) 121. SAB 121 requires banks to account for crypto assets in custodian accounts as liabilities on their balance sheets, which also involves adding assets at fair value. Banks didn't approve because this is not normally how assets in custody are accounted for and leads to higher regulatory capital and liquidity ratios. With Gensler gone, most expect that SAB 121 and the Ripple lawsuit may follow suit.
Additionally, recent media reports indicate that the Trump administration is contemplating having the Commodities Futures Trading Commission (CFTC) regulate the Bitcoin and Ethereum (ETH 0.23%) spot market. Crypto stakeholders have long preferred to be regulated by the CFTC instead of the SEC, which has many complex securities laws.
The Republican sweep in Congress also bodes favorably for crypto. Coinbase (COIN -3.17%) Chief Policy Officer Faryar Shirzad recently told CNBC that a Trump administration should pave the way for crypto legislation to pass Congress expediently. "We have the most pro-crypto Congress ever [in] history," Shirzad said.
In addition to SAB 121, Shirzad sees two bills moving through Congress either this year in the lame duck session or next year. The first is the Financial Innovation and Technology for the 21st Century Act, which the U.S. House of Representatives has approved. The bill would create an overarching legal guide for cryptocurrencies and digital assets. The sector has operated in the gray for a while, making it difficult for crypto companies and regulators to gain clarity.
Another proposed bill, the Clarity for Payment Stablecoins Act, would create a legal body to issue licenses for stablecoin companies. Stablecoins are digital assets pegged to a commodity or currency such as the dollar, and can be used to take advantage of some of the more attractive features of stablecoins without the volatility.
More is likely on the way
Trump has yet to sit in the Oval Office for his second term and the crypto industry is already reaping the rewards. I expect more to come, including wider liquidity through spot exchange-traded funds (ETFs). It took a while but the SEC approved spot-Bitcoin and spot-Ethereum ETFs. However, a more friendly SEC could approve spot ETFs for other tokens like XRP and Solana (SOL 2.34%).
ETFs make it easier for investors to gain access to crypto. More traditional investment brokerages will likely also offer more cryptocurrencies. The popular retail brokerage Robinhood (HOOD -3.37%) began selling four new tokens on its platform soon after Trump won the election. Many cryptocurrencies have already gained a lot, so I'm sure we'll get to a point where the sector is overbought. However, more good news is likely on the way, so the rally could have legs heading into 2025.
