The victory of Trump is good news for cryptocurrency. During the election, crypto was a key topic, revolving around SEC Chairman Gary Gensler.
Gensler has waged a real battle against cryptocurrency over recent years. This has led to Trump’s campaign receiving considerable sponsorship and support from crypto companies and individuals who favor a more liberal policy toward crypto. Notable supporters include the Winklevoss twins, Marc Andreessen, and Ryan Selkins. The new SEC chairman is expected to adopt a distinctly pro-crypto stance, which could allow crypto to play a larger role in investment portfolios.
Gary Gensler, Trump’s first target
Immediately following the results of the 2024 U.S. election, the American Securities Association (ASA) called for the resignation of SEC Chairman Gary Gensler. ASA President and CEO Chris Iacovella stated that Gensler’s departure is essential to aligning the SEC’s direction with the recent decision of the voters.
The ASA works to increase investor confidence, facilitate capital access for small businesses, and promote balanced capital markets. By advocating for Gensler’s resignation, the ASA aims to create a more stable regulatory environment that fosters financial independence and economic growth. The association believes that a new SEC chairman would better protect investor interests and support the development of small businesses.
Trump has promised to fire Gensler on his first day in office, a pledge he made at a bitcoin conference in July, where he criticized Gensler’s strict regulatory approach to cryptocurrency.
Gensler’s objections to crypto
Gensler’s SEC has taken enforcement action against major U.S. crypto firms in recent years, including Binance, Consensys, Coinbase, and Kraken. Others, such as Immutable and OpenSea, have also been subjects of SEC investigations. As a Democrat, Gensler has sought to regulate crypto as rigorously as stocks and bonds. Recently, however, he’s faced criticism from within his own party for his vague interpretations and stringent approach.
Gensler groups cryptocurrencies and non-fungible tokens (NFTs) with stocks and bonds, a stance many consider unjustified. A major objection from the SEC against bitcoin is the perception that crypto trading prices are manipulated. Additionally, regulators are wary of mixing cryptocurrencies (like bitcoin) with official financial channels, as this could introduce instability through money flows that central banks cannot control.
A significant feature of currency is the power it grants governments through the monopoly on force, which would be undermined if parallel transactions in bitcoin become possible. For now, bitcoin remains the only serious candidate as an alternative to traditional money.
A new, pro-crypto SEC chairman likely
One potential successor to Gensler is Hester Peirce, an SEC commissioner. Unlike Gensler, Peirce is popular in the crypto industry and has earned the nickname «Crypto Mom.» However, her term ends next year, and she reportedly is not interested in succeeding Gensler. Another Republican on the SEC board is Mark Uyeda, who has criticized the SEC’s approach to crypto regulation as a “disaster for the entire industry.”
Dan Gallagher is also a contender. Currently, Gallagher is the chief legal officer at Robinhood and served as an SEC commissioner from 2011 to 2015. It’s clear that all the likely successors to Gensler would pursue a far more pro-crypto policy. This could have significant effects on crypto’s market performance, particularly bitcoin. Bitcoin’s value has tripled since news emerged about allowing spot bitcoin ETFs. Previously, investors may have been held back by the SEC’s critical stance, but the SEC could soon become a promoter of bitcoin.
The role of crypto in investment portfolios
To date, crypto (especially bitcoin) has had a limited presence in investment portfolios, as regulators have managed to keep it at arm’s length. That was already changing, but now that the SEC is forced to adapt, anti-crypto regulators will soon be in the minority. It seems only a matter of time before other regulators adopt a more pro-crypto stance.
The Dutch Authority for the Financial Markets (AFM) still warns against crypto but also notes that cryptos, NFTs, meme coins, and decentralized trading platforms (DeFi) are currently outside its supervision. However, starting late this year, the AFM will be responsible for crypto service providers and related services. Crypto-asset service providers (CASPs) will need to apply for a license.
Previously, registration with the Dutch Central Bank (DNB) was sufficient. The licensing process takes five months, so those who haven’t yet applied face potential penalties. The combination of licensing, AFM oversight, and the SEC’s pro-crypto stance inevitably means that crypto will become part of investment portfolios, marking its integration into the financial system.
Despite bitcoin’s strong price surge, the total market size remains relatively small, especially compared to asset classes like stocks and bonds. This means that even a relatively small position in bitcoin within an investment portfolio could generate significant demand, potentially driving up the value of bitcoin further.
Han Dieperink is Chief Investment Officer at Auréus Wealth Management. Earlier in his career, he served as Chief Investment Officer at Rabobank and Schretlen & Co.