Donald Trump’s plans and support for the ‘crypto’ industry

Getting your Trinity Audio player ready...

President-elect Donald Trump‘s plans for the cryptocurrency industry are in stark contrast to the Biden administration’s approach. Trump has made several proclamations about how crypto will benefit from his time in office. He pledged to make the United States the “crypto capital of the world,” to remove the crypto-aggressive SEC Chairman Gary Gensler from his post, to create a “Strategic Bitcoin Reserve,” and to make a crypto advisory council tasked with designing transparent regulatory guidance to benefit the digital asset industry. But what does any of this really mean? In this article, we’ll explore how these initiatives—if they come to fruition—will impact the cryptocurrency industry.

Will Trump’s crypto promises become reality

A caveat I’ll throw out before we jump into it is that it could very well be the case that Trump made crypto-related promises to win over a voter base of crypto enthusiasts. Some of these things he has said may never come to fruition, or if they do become a reality, there’s no certainty regarding how long they will take to come into existence. For all we know, they could launch during his first 100 days, or, during the last year of his presidential term.

But let’s say these agenda items take place sooner rather than later, and all of these different platforms Trump has campaigned on become a reality; how will it affect crypto holders?

Trump’s proposed White House crypto role(s)

Recently, President-elect Donald Trump mentioned that his administration was “considering creating the first-ever White House crypto role” and that they were actively vetting candidates for the job—which may be directly related to the meeting Trump had with Coinbase (NASDAQ: COIN) CEO Brian Armstrong. If the White House does choose to create a crypto role, the individual would be responsible for managing the relationships between Congress, the White House, and other government agencies concerning their jurisdiction, policies, and regulations regarding cryptocurrency.

If this White House crypto role does come to fruition, I’d expect it to be the equivalent of having an internal champion for the industry in the highest government office in the United States. I would think that the individual in this role would partially play the role of a lobbyist, persuading lawmakers, regulators, and other public officials to either support or oppose specific policies, bills, or regulations that would affect the digital asset industry. Based off the Trump administrations tone and attitude toward crypto so far, the individual in this role would most likely be making efforts to move the industry forward.

Trump’s Bitcoin strategic reserve

Trump has also said that he would set up a Bitcoin (BTC) strategic reserve once he is in the White House and that it will be the job of the crypto advisory council he plans to create to set this reserve up. A strategic reserve asset is a physical asset that a country’s government stockpiles as a sort of safety net or emergency ration that can be dipped into during severe market disruptions or unexpected events—for instance, the United States has a Strategic Petroleum Reserve that can be used during global oil-supply emergencies.

If or when BTC becomes a strategic reserve asset, it means quite a few things for the market and is bound to have an economic impact. For starters, it means the United States government will need to begin accumulating Bitcoin, putting demand pressure on the limited supply of 21,000,000 coins, of which roughly 19,787,340 are already in circulation.

There are primarily three ways that the USA can begin building its BTC strategic reserve: Occasionally, the federal government confiscates Bitcoin when it busts up criminal activity, so one way to begin building the strategic reserve would be to keep the Bitcoin it confiscates instead of auctioning off the seized assets as it has historically done. This method will work, but the problem is that it isn’t predictable how many times the government will seize Bitcoin from criminals in any given year.

The second, more feasible option that comes to mind is for the federal government to buy Bitcoin to add it to its reserves. This method would be pretty straightforward—the government would work directly with miners or digital asset exchanges to buy the coins they will add to their strategic reserve. Doing this would create buy pressure on the market and is likely to bid up the price of BTC, especially if the government is purchasing large amounts.

And lastly, the government could decide to become a miner or take some sort of stake in a BTC mining operation to begin building or adding BTC to the strategic reserve. This would mean that they either ink some sort of deal with an existing miner and siphon off a portion of the total amount of BTC that miner produces (like an equity stake), or it means the government will spin up a data center that it uses to mine BTC, becoming an active player on the network.

Either way, if BTC becomes a strategic reserve, a government backstop will effectively be put into place on the BTC network. This means that if all else fails, market participants would at least know the government has money tied up in this thing and therefore has somewhat of an incentive to prevent anything devastating from happening to the asset. I’ll also add that when the government holds an asset, or, better yet, declares something a strategic reserve asset, the asset will start to obtain perceived value beyond its true value. This is because the government is verifying/validating that they believe said asset has value to the point where it can help them or the world out in emergencies. This perceived value and narrative will become a sticking point in arguments. It will be a “fun fact” that can be whipped out in conversations and effectively a point that is used to strengthen the argument that there is an upside to be had in BTC and, therefore, a case for adding BTC to a portfolio.

Trump’s plan to replace SEC Chair

Trump has pledged to fire the current SEC Chairman, Gary Gensler, and although the President does not have the ability to fire the individual in that role, Gensler’s term ends in 2026, and it is clear that Trump has no intention of reappointing Gensler. Instead, it is expected that Trump will place a crypto-friendly individual into the SEC chair. Although his nomination has not been finalized, a shortlist is circulating, and several people on this shortlist have a direct connection to the cryptocurrency industry or have taken a positive/supporting approach to the industry and the innovation that happens within it, especially in the United States.

This will be a positive for the industry and will likely put some wind in the sails of the market and its participants. It’s also a pretty distinct departure from what will soon be the preceding Gensler administration of the SEC that was keen to crack down on crypto, making examples out of multiple companies but at the same time making many fearful to launch, innovate, or even participate in the cryptocurrency industry, especially if they were located in the United States.

A promising future for crypto under the Trump administration

All of this signals a promising shift for the digital asset industry. Unlike previous administrations, the support for Trump is loud, direct, and explicit. With the expectation of policies, regulations, and key appointments in the White House favoring the growth and innovation within the space, the Trump administration appears to be positioning itself to create an environment where the industry can thrive. This support from the highest levels of government could provide the momentum needed to revitalize the blockchain and cryptocurrency industry after the dismal four-year period it appears to be finally leaving.

Watch: Python SDK—Essential tool for BSV developers