Even the regulation of the multibillion-dollar cryptocurrency business appears to be a story of drastically opposite approaches in our polarized political system. But as always, the best course of action might be to carefully choose a path between the extremists who are angrily expressing their views.
The Biden administration’s enforcement-heavy approach, which relied on pre-existing legal structures that many in the crypto industry do not think apply, has undoubtedly been drastically different from the Trump administration’s attitude to digital assets. The president himself even created a meme token on the Solana blockchain called $TRUMP, which brought in around $100 million in trade fees. No previous president in American history is likely to have taken any action that is even close to this. In order to strengthen U.S. leadership in digital assets and create a “crypto strategic reserve,” he also signed an executive order on January 23, 2025.
In the past, Silicon Valley startup CEOs longed to establish their cryptocurrency businesses in more hospitable and straightforward governments; some of them moved to Singapore in the Pacific or Switzerland in the Atlantic. Now that the Trump administration has taken steps to regulate cryptocurrency, the United States is once again a desirable destination.
The shift is more than just a policy preference; it marks a fundamental reconsideration of how America should position itself in the quickly growing blockchain economy.
Under the Biden administration, Gary Gensler, the chair of the Securities and Exchange Commission, pursued what detractors dubbed “regulation by enforcement,” applying securities laws that were already in place to cryptocurrency markets that many people did not think applied to those markets without offering explicit, forward-looking guidance. Due to the ambiguity created by treating the majority of digital assets as unregulated securities subject to conventional registration rules, many industry participants believed that innovation was being stifled. Asserting that current financial laws were adequate to regulate digital assets in the absence of new regulatory frameworks, Gensler’s SEC filed multiple enforcement proceedings against cryptocurrency businesses.
Trump’s SEC chair, Paul Atkins, on the other hand, supports greater innovation and more transparent, predictable laws that are especially suited to the cryptocurrency markets. Rather than aggressive enforcement focused on applying existing laws, which many industry insiders characterized as “pounding a square peg into a round hole,” his approach places an emphasis on working with industry to build a framework where the rules are clearly known as the principal regulatory tool.
The philosophical disagreement goes beyond tactics for enforcement to include basic issues with financial inclusion and innovation. By approaching cryptocurrency with the skepticism that comes from traditional banking regulation, the Biden administration’s cautious approach mirrored worries about consumer safety and financial stability. Critics contended that this strategy disregarded the potential of cryptocurrency to democratize finance by giving people more control over their financial holdings and providing alternatives to traditional banking systems.
But while Trump’s crypto policy detractors claim that less federal control will lead to more problems, Adkins has stated that laws will exist, but they will be specific to the crypto industry, making it a square peg in a square hole. The effectiveness of the new federal crypto restrictions will depend in large part on whether they will “preempt” state legislation, which means that federal law takes precedence over state law.
Remember that each of the 50 states in the United States has its own set of laws and regulations pertaining to investments. If there is no “preemption,” crypto businesses will have to comply with a number of rules and registration requirements set forth by the federal government and numerous state governments. This might make the market more complicated and costly to operate. Crypto businesses that operate in New York, for instance, will continue to be governed by the city’s “BitLicense” licensing and regulatory framework. California recently passed the Digital Financial Assets Law and is currently putting it into effect, which will also force many cryptocurrency businesses to apply for a license. The licensing requirements for money transfer in many states will still be applicable to cryptocurrency businesses.
Additionally, securities regulators and state attorneys general can try to close a perceived enforcement gap in the crypto space. One of the most aggressive enforcement cases against well-known cryptocurrency companies has been brought by New York Attorney General Letitia James. Without New York, the financial markets would be difficult to envision. President Trump’s administration will see a continuation and perhaps an increase in this state enforcement activities, especially in states that disagree with many of his policies.
Consumer activists fear that scams and schemes could run wild in a chaotic Wild West created by Trump’s rules. The banking system has always been plagued by fraud, scams, and mysterious individuals. Despite the fact that more frauds are committed with US dollars than cryptocurrency, Charles Ponzi, whose name is synonymous with fraud, and Bernie Madoff were able to perpetrate scams without cryptocurrency. And why? Take the renowned bank robber Willie Sutton’s statement from the 1930s: “because that’s where the money is” as an example.
The solution has never been to stop using U.S. dollars, shutdown banks, or shut down the stock market. Likewise, it is not intended to prohibit grandparents from making cryptocurrency investments.
The answer is the same as it has always been: to promote innovation, regulate with the proper ratio of laxity and control, and enact sensible rules that don’t stifle creativity or the sector while allowing for a hard crackdown when someone crosses the line.
America cannot succeed if its markets are too loose and uncontrolled. However, the United States will also lose if all innovation is pushed overseas and Shenzhen, Singapore, and Switzerland emerge as global financial hubs.
Since this is a discussion about our future, it is too crucial to become mired in the black and white of political divisiveness. Together, we must determine how best to best position America to lead or follow in the next stage of financial innovation.
