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As Donald Trump is inaugurated for a second term as President of the United States, his administration is laying the foundation to fulfill one of his major campaign pledges: transforming the U.S. into a "bitcoin superpower" and establishing it as "the crypto capital of the planet." Since the inception of Bitcoin 16 years ago, the cryptocurrency landscape has evolved into a contentious topic, representing both an alternative financial system and a political flashpoint. Advocates of crypto argue that it offers rapid and unrestricted access to financial services, bypassing traditional banking systems. They assert that, even today, cryptocurrencies remain the quickest and most cost-effective means to transfer money worldwide.
However, much like Trump himself, the crypto market is marked by volatility, with asset values soaring to incredible heights only to plummet dramatically. This unpredictability likely explains Trump's shifting stance on cryptocurrency; in 2021, he expressed strong anti-crypto sentiments, labeling digital currencies as hazardous and advocating for investment in U.S. fiat currency. Yet, as of 2025, he has embraced a robust belief in the potential of cryptocurrencies.
In November, when early voting results indicated Trump's return to the White House, Bitcoin's value surged to record levels, exceeding $100,000 within a month. However, much like Trump's image, the crypto sector has become linked to both affluence and illicit activities. The industry's reputation took a severe hit following the November 16, 2022, bankruptcy of FTX, a major global cryptocurrency exchange, which occurred just one day after Trump announced his presidential candidacy. Founder Sam Bankman-Fried (SBF) was accused of misusing $8 billion in customer funds and defrauding investors of $1.7 billion. Beyond the financial misappropriation, SBF’s companies projected a misleading aura of infallibility, which ultimately damaged public perception.
Proponents of cryptocurrency may view the FTX debacle as a necessary phase in the industry's maturation, while critics might interpret it as evidence of its underlying corruption. However, the crux of the matter lies not in the politicization of crypto but in its definition. Regulatory ambiguity has hampered the industry's adoption; different agencies define crypto differently: the Securities and Exchange Commission (SEC) classifies it as a security, the Internal Revenue Service treats it as property, and the Commodity Futures Trading Commission designates it as a commodity.
Sean Stein Smith, an associate professor at Lehman College and founder of the Institute for Blockchain and Cryptocurrency Research, stated, “A large part of the issues and the problems that have kept crypto from either gaining adoption, going mainstream, or raising more capital [in the U.S.] is the uncertain regulatory outlook.” Nemit Shroff, a professor of accounting at the MIT Sloan School of Management, highlighted the uncertainty surrounding the next administration's stance: “Will they take a more neutral stance to revert to the pre-Gary Gensler period, or will they adopt a position more favorable to the industry's development?”
With Trump now in office, the future of the U.S. crypto landscape is likely to hinge on his political preferences, which currently seem optimistic. In December, he revealed intentions to nominate prominent crypto advocate Paul Atkins as the next SEC chairman. Announcing this on his social media platform, Truth Social, Trump praised Atkins’s commitment to “common sense regulations” and emphasized his experience in the digital asset sector.
Atkins’s potential appointment signifies a departure from the more stringent approach taken by his predecessor, Gary Gensler, who characterized the crypto realm as “rife with bad actors.” During Gensler’s tenure, which lasted from 2021 to 2025, the SEC initiated around 100 enforcement actions against the cryptocurrency industry, raising concerns about the implications of regulation on the sector.
A significant challenge lies in achieving a balanced regulatory framework. If regulations are too lenient, fraud may proliferate, while overly strict measures could drive businesses out of the U.S. Experts argue that there must be an equilibrium between investor protection and nurturing financial innovation. Critics contend that Gensler’s requirements made numerous crypto projects unviable by mandating that they register with the SEC as securities, a process that involves extensive disclosure requirements.
Shroff noted that the registration process mandates companies to provide financial statements, balance sheets, and cash flow statements. He warned that tokens classified as securities would not be tradable on existing crypto exchanges, effectively rendering many projects unfeasible. Tara Mac Aulay, founder of Lantern Ventures, pointed out that the challenging regulatory environment in the U.S. favors unscrupulous actors who operate non-compliant businesses offshore.
SBF's decision to base FTX's operations first in Hong Kong and later in the Bahamas underscores this trend, as the exchange specialized in markets prohibited in the U.S. Despite primarily being a non-U.S. entity, FTX sought bankruptcy protection in the U.S. after its collapse.
The aftermath of the FTX scandal continues to reverberate through the industry, serving as a cautionary tale about the importance of corporate governance and transparency.
Advocates like Mac Aulay and Shroff propose that U.S. regulation should draw inspiration from the UK’s approach, which aligns compliance requirements with the size and complexity of crypto firms. They recommend that smaller companies face less stringent regulation, while larger entities like FTX must comply with fundamental disclosure standards.
Shroff emphasized the need for basic disclosures regarding a project’s native token, such as supply metrics and ownership details. FTT, the native token of FTX, exemplifies why such transparency is vital; SBF and Alameda Research held 90% of FTT, linking its value closely to FTX’s financial health—a connection that was never disclosed and later contributed to the exchange's downfall.
Stein Smith summarized the essential components of effective crypto regulation as corporate controls, financial disclosures, and regulatory inspections. He asserted that any firm entrusted with customer funds must undergo rigorous scrutiny, even if based in a less regulated environment. Furthermore, he remarked that companies led by inexperienced individuals handling substantial capital warrant regulatory oversight.
The notion of regulation through enforcement has drawn frustration from crypto entrepreneurs, leading Mac Aulay to propose a shift towards principles-based regulation that emphasizes ethical conduct rather than strict adherence to specific rules. She noted that regulation of the fast-evolving tech industry requires an acknowledgment that regulators may lag behind innovation, rendering it difficult to establish consumer protections through rigid regulations.
By fLEXI tEAM
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