what’s at stake
President Donald Trump used his first week in office to start making good on his promise to be a “crypto president,” taking several steps to demonstrate his affinity for a US digital asset industry that clashed with his Democratic predecessor’s regulatory efforts.
Trump signed an executive order creating a working group that will look at the possible creation of a national cryptocurrency stockpile. The new acting chair of the SEC launched its own crypto task force that it said would work toward clear rules for the industry rather than “enforcement actions to regulate crypto retroactively and reactively.”
And the president, as well as first lady Melania Trump, sparked Democratic concerns about foreign influence by releasing crypto meme coins with their images attached.
It’s the start of what will likely be a years-long debate over how to craft policy for an industry that spent significantly to boost its favored candidates in the 2024 election. Semafor spoke with two experts on different sides of the question of how lawmakers should approach the industry — especially in light of last Congress’ attempted regulatory effort, which passed the House on a bipartisan basis but stalled in the Senate.
who’s making the case
Graham Steele, a fellow at the Roosevelt Institute and assistant secretary for financial institutions at the Treasury Department from 2021-2024, argues that active enforcement of existing laws can go a long way to limit risks in the digital industry, but more targeted action is also needed:
“There are two areas, in particular, where there are not sufficient laws and regulations in place already. Congress can improve the framework by providing the Commodity Futures Trading Commission with regulatory authority over spot crypto trading and by enhancing the Treasury Department’s authority to address crypto-related money laundering. These reforms would allow agencies to extend financial protections to crypto products that most agree are currently falling through the cracks and clarify agencies’ authority to address crypto’s use as a vehicle for illicit activity.
There are five things that Congress needs to focus on. The first is whether investor and consumer protection laws and laws counteracting illicit finance are fit for purpose in addressing the kinds of scams that we’re seeing with meme coins and other crypto products — including the extremely unfortunate meme coin recently launched by the president of the United States himself. Second, if they are, I would urge members of Congress to push the financial regulatory agencies to enforce the laws. But third, if the laws have gaps, they should close the gaps — especially in the specific areas I mentioned before. Fourth, I would caution them to be careful when addressing claims about so-called ‘de-banking.’ I think the banking agencies have so far taken a cautious but prudent approach to crypto, and many of the legislative proposals that I’ve seen to address this alleged issue could undermine some fundamental banking supervision and regulation authorities. The last thing I would say is that, at a high level, more needs to be done to address our nation’s legacy of predatory and discriminatory lending and financial crises and bailouts that have caused many Americans to distrust financial institutions. There’s truth in many of the critiques of our financial system that crypto firms and their customers endorse, and those shortcomings only serve to increase the appeal of misleading claims made by predatory financial actors looking to cheat people out of their hard-earned money.”
Kristin Smith, CEO of the Blockchain Association, an industry group, argues that enforcement of existing laws can amount to “apply[ing] century-old rules to new innovations,” and that regulators should be clear but flexible in order to accommodate the growing industry:
“Without proper laws on the books, hostile regulators have attempted to apply century-old rules to new innovations. This forced important regulatory questions to be litigated in the courts instead of through policymaking, creating a chilling environment for innovators, many of whom chose to move operations overseas to avoid burdensome legal costs and regulatory risks.
Now is the time for Congress to step in and provide clear rules of the road. A regulatory regime for crypto should strike a balance between fostering innovation and ensuring consumer protection, guided by principles that promote competition and fairness.
Regulation must be precise — policymakers should focus on financial activities rather than the underlying blockchain technology itself, adopting a fit-for-purpose and tailored approach that safeguards innovation. This ensures developers and entrepreneurs are not hindered by excessive or misaligned rules just because they are developing a certain technology.
Specifically, lawmakers must provide clarity on market structure, token classification, and custody. These equate to the clearly marked stop signs and traffic lights needed to allow for safe and efficient travel for everyone on the road.
Additionally, because crypto is global and decentralized, a proper regulatory regime should reduce cross-border friction and protect non-custodial software and decentralized protocols. These measures will ensure an even playing field and smooth on- and off-ramps, allowing the United States to remain globally competitive.
Finally, implementation must be carefully designed to support existing business models while allowing for innovation around emerging models. Just as there may be improvements in road infrastructure yet to be conceived, regulators should not disallow these developments simply because they are new.”