WSJ What’s News - What the New U.S. Administration Could Mean for Crypto Industry

Episode Date: December 29, 2024

In the wake of Donald Trump’s election, the crypto industry is feeling jubilant. But what are crypto fans and executives hoping for from the next president’s administration? WSJ crypto and retail investing reporter Vicky Huang and consumer protection and corporate law enforcement reporter Dave Michaels look into po ssible financial futures for crypto and what it will take to get there. Charlotte Gartenberg hosts. Further Reading PCAOB Critic Picked for SEC Chair, Raising Potential for a Smaller Audit Watchdog  Crypto Players Celebrate SEC Pick, Bitcoin Touches $100,000  Who Is David Sacks, Trump’s Pick for AI and Crypto Czar?  Trump Picks Paul Atkins to Run SEC  These Five Wall Street Titans Thought Bitcoin Was a Fad. Here’s What They Say Now.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Amazon Q Business is the generative AI assistant from AWS because business can be slow, like wading through mud. But Amazon Q helps streamline work, so tasks like summarizing monthly results can be done in no time. Learn what Amazon Q Business can do for you at aws.com slash learn more. Hey What's News listeners, it's Sunday, December 29th. I'm Charlotte Gartenberg for The Wall Street Journal. This is What's New Sunday, the show where we tackle the big questions about the biggest

stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. This week, the crypto industry is feeling confident as political winds seem to be blowing in its favor. But what might the new administration actually do for the industry? And what would that mean for crypto's place in financial markets? Let's get to it. The crypto world is jubilant. Earlier this month, bitcoin traded above $100,000 for the first time. And crypto execs seem hopeful about a more crypto-friendly environment under President-elect

Trump's administration. Under the current administration, regulators have been trying to police crypto. Under the leadership of Gary Gensler, the Securities and Exchange Commission brought several cases against crypto exchanges like Coinbase and Binance. Crypto enthusiasts are hoping that Trump's new pick to lead the SEC, Paul Atkins, will help smooth the road for the now $1 trillion industry. But what changes might we actually see with the incoming administration? And what would that mean for crypto's place in the finance world?

Here to walk us through all of what's happening with crypto and its future is reporter Vicki Wong, who covers crypto and retail investing, and reporter Dave Michaels, who covers corporate law enforcement, antitrust litigation, and consumer protection in the Wall Street Journal's Washington bureau. All right, let's start with Vicky, because you report on crypto. Help me understand what cryptocurrency is today. How are people thinking about crypto and what it can do? When we talk about that, let's go back to Bitcoin.

Bitcoin was created in the aftermath of the financial crisis as a new kind of currency that will kind of help you to take control of your money from the government and not rely on a third party, a middleman like a bank. And throughout the years, Bitcoin somehow evolved into something else entirely. It started out with this desire to be a currency, but then it got listed on exchanges where people can buy and sell Bitcoin. And before you know it, it became sort of a speculative asset where the price rises and falls.

Every couple of years, it goes through this boom and bust cycle and people speculate on it, bet on it, hoping that the number will keep going up. So the new narrative in the crypto world is that Bitcoin is kind of like digital gold, a store of value where it could somehow help you to protect your savings against inflation. However, that has not been substantiated. Bitcoin is a type of crypto though. So if I understand Bitcoin, I understand it all or what's the bigger hat to understand? Yes. So Bitcoin is the very first cryptocurrency. And after the success of Bitcoin,

all these other entrepreneurs, founders came onto the scene and started creating these alternative cryptocurrencies such as Ethereum, Sonana, even the meme coin, which was created as a joke token, Dogecoin. Now you have thousands of alternative cryptocurrencies outside of Bitcoin. And when it comes to the debate between whether cryptocurrencies are securities or commodities, I'm sure Dave will dive into it later, but the current chair of the Securities and Exchange Commission, Gary Gensler, has said almost all cryptocurrencies outside of Bitcoin are securities, but the crypto industry believes that a lot of the tokens are

commodities that should be under the jurisdiction of the Commodity and Futures Trading Commission. That's exactly the question and it's a good moment to bring in Dave. Dave, who regulates cryptocurrency now and how do they actually do that? When it comes to the issuance and the trading of cryptocurrencies, no one regulates that. It is a completely unregulated market, but the Securities and Exchange Commission has been trying to regulate it for about seven and a half years. The SEC believes that the way that these coins, these digital coins and tokens are issued,

makes them investment contracts, which is a type of a security. And the SEC has said, you should comply with the rules that we enforce. The crypto industry doesn't want that. They say, definitely not. Give us something less than what the SEC imposes on Wall Street and on security. So the truth is today no one regulates it but the industry has been living under a lot of regulatory pressure and heat for the last several years.

Okay. Let's talk about Trump's pick to head the SEC, Paul Atkins. Well we know that Paul Atkins is probably going to take a different tack in terms of crypto. So you can think about the way the SEC has approached crypto for the last seven years as the SEC has sued filed lawsuits against a lot of projects and exchanges trying to get those entities to follow the SEC's rules. So it's a litigation strategy, if you will.

And I think it's reasonable to think is that Paul Atkins is going to, he's going to do the alternative, which is to try to stop litigating, try to reduce the number of enforcement investigations and come up with some kind of a compromise that the industry could live with that might exempt the industry from the SEC's regulations at least for a while But at the same time he has to keep in mind that there are investors and consumers in this market and they need some protections So there's the question mark and the regulatory pressure that crypto is facing. Not the most stable environment for the crypto industry.

We have to take a quick break, but when we come back, what a more stable environment for crypto could look like and if crypto fans are right in their hopes for that future. That's after the break. With Uber Reserve, good things come to those who plan ahead. Family vacay? Reserve your ride as soon as you book your flights. To all the planners, now you can reserve your Uber ride up to 90 days in advance. See Uber app for details. Dave, if the crypto industry manages to get this more stable environment where, you know, we know who's regulating crypto, we know sort of more of the rules around it, what does

that mean? I think it means that the industry is definitely poised for growth. You know, it's a more stable and permanent form of regulation would welcome in more institutional investors. It would give like startups that want to create new cryptocurrency networks and applications. And then also, it would mean that Wall Street could like get more involved, right? We have a limited number of mainstream products which are mostly exchange traded funds that hold

assets like Bitcoin and Ethereum so we could see more of those kinds of funds holding other kinds of cryptocurrencies the the altcoins, the alternative coins. And that would put a lot more wind behind the sales of the industry. There is lots of excitement in the crypto world over Trump's coming presidency. Vicky, are they right to be pumped? Yeah. So President-elect Donald Trump, who literally was once a big crypto skeptic Donald Trump, who literally was once a big crypto skeptic and called Bitcoin a scam against the dollar, started embracing crypto earlier this year. He sort of became the first ever pro crypto president.

He started meeting with crypto industry executives, telling them that he's going to kind of usher in this era of crypto friendly policies and elect people that would help move the industry forward and foster innovation. He also made a series of promises to the crypto industry. One of them is firing the current SEC chair, Gary Gensler, on day one. Another important one was he would set up this so-called strategic Bitcoin reserve, where he would ask the government to keep all of the Bitcoins that he has seized from cyber criminals and darknet markets. And instead of selling them, he would ask the government to keep them and potentially acquire more.

This is something that would really just be very appealing to any Bitcoin holders because anytime the U.S. government announces that you will buy any asset to keep it as part of its strategic reserve, it sort of starts this buying frenzy for all the other countries to start buying this asset. Steve, how would the government become a buyer of crypto? There is the fact that the government already owns a stockpile of Bitcoin that it has seized through criminal law enforcement cases. And it's possible that that could sort of be the seed round for a Bitcoin strategic

reserve. But the other idea is that down the road, the government would have a major capital gain on whatever Bitcoin it buys, and it could use that to pay down the national debt. That's the justification for it beyond just having the government be a big buyer of Bitcoin that would push up the price for everybody else. Assuming the industry gets the more crypto friendly environment they're anticipating under Trump, what does that look like for consumers, for investors, for crypto exchanges? What is that bright crypto future?

There was this narrative that a lot of the crypto startups had to move abroad because the current regulatory environment has been so difficult for them. So potentially, these companies would just stay in the US and helping the industry grow in the US. And then the other aspect is the potential proliferation of products. But on the flip side, that also just means that if there is a big swing in token prices,

mainstream investors would be more and more involved in the risks going on in the crypto market. All right. So before we go, can I buy a Big Mac with crypto or no? I think you can do that, but that still doesn't prove its use case that what else can do besides being this potential payment method and trading asset. That was reporter Vicki Wong and reporter Dave Michaels. Vicki, Dave, thanks so much for being here.

Thank you for having me. Thank you. And that's it for What's New Sunday for December 29th. Today's show was produced by me and Jess Jupiter with supervising producer Michael Cosminis. We got help from Deputy Editors Scott Salloway and Chris Zinsley. I'm Charlotte Gartenberg. We'll be back on Monday morning with a new show. Thanks for listening.