The crypto party seems to be getting restarted. Bitcoin is surging and big players are celebrating amid expectations that President-elect Donald Trump will make the US, as he put it, “the crypto capital of the world.”
Lest this experiment go awry, regulators need to keep some guardrails in place.
In its current incarnation, crypto has at best an indirect potential to benefit society. Most of its enterprises — such as the Trump-promoted World Liberty Financial — have little or nothing to do with the technology’s capacity to, say, improve cross-border payments or securities settlement. The most popular digital tokens tend to be purely speculative instruments, with no connection to the real-world cash flows from which financial assets derive their value. They’re traded on platforms rife with scammers, manipulation and conflicts of interest, enriching primarily the kind of intermediaries that crypto was supposed to eliminate.
Under President Joe Biden, the Securities and Exchange Commission has sought to shut crypto down rather than introduce rules to accommodate and civilize it (as Europe, for example, is attempting). SEC Chair Gary Gensler sued two of the world’s largest trading platforms, Binance Holdings Ltd. and Coinbase Global Inc., for various violations of securities laws — an effort that, if successful, could’ve forced them out of the country or even out of business.
Things have changed. Trump has pledged to fire Gensler and even establish a “strategic national Bitcoin stockpile,” to the delight of crypto advocates who pumped more than $200 million into his campaign and those of dozens of successful congressional candidates. Industry-sponsored legislation would largely neutralize the SEC, facilitating a proliferation of issuance and trading with minimal oversight — particularly given the president-elect’s likely appointments to the relevant regulators. In the 10 days following Trump’s election, Bitcoin jumped more than 30%. Dogecoin, created as a joke, nearly doubled.
Without being alarmist or unduly meddlesome, it’s worth pondering some of the ways in which things could go wrong.
