In Trump’s third week in office, events in Washington DC dominated the crypto news headlines this week. The events generally supported the digital asset industry with the caveat that specifics in key areas are still elusive, and change will take time to implement. The highlights of the week were:
Press Conference on Digital Assets
White House AI and Crypto Czar David Sacks brought key legislators together for a joint press conference on digital assets. The briefing outlined the administration and lawmakers’ key initiatives, including a newly introduced stablecoin bill, market structure reform, a comprehensive regulatory framework for digital assets, as well as the evaluation of a bitcoin strategic reserve (BSR).
The newly introduced GENIUS Act and draft bill from the House Financial Services committee aim to regulate and license entities seeking to issue stablecoins. While this legislation, along with the previously introduced FIT21 bill on market structure, is expected to shape the foundation of future regulations, the versions are likely to evolve significantly as bills work their way through the legislature.
The conversation surrounding a potential BSR marked a significant shift from the original White House Executive Order, which initially stipulated a more general “digital asset stockpile” rather than a bitcoin-specific reserve, much to the ire of the Bitcoin community. The initial language left room for other digital assets to be included. However, during the press conference and in subsequent interviews, David Sacks strongly advocated for bitcoin and bitcoin only, praising it as an excellent store of value with a long and proven operating history.
Hearings on Debanking and Operation Chokepoint 2.0
This week also featured two key hearings - one addressing the debanking of certain businesses, including crypto companies, and another focused on broader regulatory and banking activities collectively referred to as “Operation Chokepoint 2.0.” The release of documents under FOIA requests, including 175 new communications this week, has shined a light on what has gone on behind closed doors over the past couple of years. While we expect a shift with the new administration, much of what was discussed and disclosed this week highlighted the role regulators played in stifling crypto activities at banks under the Biden administration.
Changes Afoot at SEC
On Tuesday, the head of the SEC’s new Crypto Task Force, Hester Peirce, outlined the group’s key focus areas, including clarifying crypto asset classifications, improving registration processes, addressing custody, lending, and staking rules, refining ETF approvals, and exploring cross-border regulatory frameworks to foster innovation while ensuring compliance. Peirce stressed that progress on the list, while non-exhaustive, would take some time.
It was also reported in the media that the SEC scaled back its enforcement efforts, particularly in the realm of cryptocurrencies, where 50 lawyers were reassigned to other divisions. Furthermore, it was reported that formal orders of investigation would need to be approved by the Commission, an authority historically delegated to lower staff.
Sovereign Wealth Fund Ordered
Trump also signed an Executive Order to establish a sovereign wealth fund. While some state-level wealth funds exist, like Alaska, Texas, and New Mexico, the US has never had a national-level investment fund. However, key details such as timing, size, investment strategy, and funding sources remain unknown, though in interviews David Sacks suggested that bitcoin investment has not been ruled out entirely.
Looking at the largest sovereign wealth funds around the world, their source of funds comes from one of three places – oil and gas exports, foreign exchange reserves from trade surpluses, or state-owned enterprises. While the US is a net exporter of both oil and gas, those dynamics are relatively recent, emerging first in 2017, and the US, unlike China, runs a trade deficit. The jury is out on this one; we’ll have to wait to see more details before having a stronger view.
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