Odd Lots Podcast: "This Is What the Crypto Industry Actually Wants From Trump" Released on January 20, 2025

In this compelling episode of Bloomberg's Odd Lots, hosts Jill Wiesenthal and Tracy Alloway delve deep into the evolving relationship between the crypto industry and the Trump administration. With the landscape of financial regulation shifting, the conversation uncovers what the crypto sector truly seeks from a Trump-led government, exploring regulatory clarity, the future of stablecoins, and the broader implications for the financial ecosystem.

1. Introduction: Crypto's Optimism Amid Political Change

[02:01] Jill Wiesenthal:
Jill opens the discussion by highlighting the crypto industry's excitement about the new Trump administration. She notes an apparent affinity between members of the administration and the crypto sector but questions the tangible outcomes of this relationship.

"A lot of people in the crypto industry are excited about the new Trump administration and perhaps regulatory changes that may come about... I don't have a clear idea [of what it means substantively]."
— Jill Wiesenthal, [02:01]

2. Guest Introduction: Austin Campbell on Crypto and Regulation

[04:24] Austin Campbell:
The episode welcomes Austin Campbell, an adjunct professor at NYU Stern School of Business and CEO of WSPN USA, a stablecoin issuer. Austin provides insights into the current state of the crypto market, emphasizing the industry's fragmented nature and the ongoing struggle for regulatory professionalism.

"WSPN is an up and coming stablecoin issuer... the industry still has a long way to go to get genuinely professionalized."
— Austin Campbell, [05:26]

3. The Quest for Regulatory Clarity

[06:30] Austin Campbell:
Austin discusses the crypto community's demand for regulatory clarity under the Trump administration. With the replacement of SEC Chairman Gary Gensler by Paul Atkins, a known crypto proponent, there's cautious optimism. Austin underscores the importance of having clear rules to facilitate legitimate business operations without excessive regulatory overreach.

"Crypto is never a unified body. Everyone wants different things, and there's all this infighting."
— Austin Campbell, [06:30]

4. The SEC's Role and Legal Challenges

[08:32] Jill Wiesenthal:
Jill brings up the difficulties in passing new legislation, especially concerning how current laws like the Securities Act of 1933 ("the 40 Act") are outdated in the context of modern cryptocurrencies.

[09:24] Austin Campbell:
Austin emphasizes the need for a clear rubric to distinguish when a token qualifies as a security. He criticizes the SEC's focus on ledger technology over economic substance, arguing that economic realities should dictate regulatory approaches.

"The reality is there's been an overwhelming focus on the use of ledger technology... It's an economic substance test."
— Austin Campbell, [09:24]

5. Balancing Regulatory Clarity and Overreach

[11:22] Austin Campbell:
Addressing concerns about regulatory overreach, Austin acknowledges the risk of Washington implementing unfavorable rules. However, he remains hopeful that principle-based regulation focused on economic substance will prevail, allowing the industry to adapt without stifling innovation.

"Principles based regulation focused on economic substance is probably the best outcome."
— Austin Campbell, [11:31]

6. Defining Securities in the Crypto Era

[13:39] Austin Campbell:
Jill probes into the applicability of the Howey Test for determining securities in the crypto space. The discussion reveals the complexities in categorizing tokens, with Austin pointing out that while some tokens clearly fall outside securities, others reside in a gray area.

"A lot of these tokens do exist at the gray area of Howie in general."
— Austin Campbell, [13:39]

7. The Future of Stablecoins and Banking Integration

[20:55] Austin Campbell:
The conversation shifts to stablecoins, with Austin expressing optimism about federal legislation in 2025 facilitating their growth. He predicts a significant shift in the Eurodollar market, moving towards stablecoin integration for improved efficiency and standardization.

"I think over the next, call it 20ish years, probably the entire eurodollar market is moving to stablecoins."
— Austin Campbell, [24:59]

[22:48] Austin Campbell:
Discussing the potential collaboration between big banks and stablecoins, Austin envisions a future where major financial institutions leverage stablecoins to enhance payment systems, citing Stripe's acquisition of Bridge as a testament to this trend.

"Legally, there would be nothing stopping... a JP Morgan, a Wells Fargo... from starting a segregated trust company and just using that to launch a stablecoin."
— Austin Campbell, [22:48]

8. Debanking and the FDIC's Regulatory Stance

[29:56] Austin Campbell:
The episode addresses the contentious issue of debanking within the crypto industry. Austin critiques the FDIC's stringent regulations that have made it nearly impossible for crypto companies to secure traditional banking services post-FTX collapse.

"FDIC is basically stuck in the 1970s... they're applying a huge amount of scrutiny... an industry level ban on innovation."
— Austin Campbell, [35:41]

9. Legislative Shifts and the Path Forward

[38:50] Austin Campbell:
Highlighting the broader regulatory landscape, Austin points out that the shift of Senate control to Republicans is paving the way for favorable crypto legislation. He believes that this political change might have a more profound impact on the industry's regulatory future than the Trump administration itself.

"Senate banking was serving as a bottleneck for a lot of legislation... With the Republicans in control, I think the pathway is open for legislation."
— Austin Campbell, [40:04]

10. Concluding Insights: Navigating a Complex Regulatory Environment

[44:25] Austin Campbell:
In wrapping up, Austin reflects on Bitcoin's adaptability and the crypto industry's dichotomy of seeking both decentralization and regulatory integration. He underscores the irony of crypto advocates pushing for governmental involvement while championing minimal interference.

"If you convince the government that bitcoin is strategic, the government might start doing things associated with other strategic resources... it's the Streisand principle."
— Austin Campbell, [44:25]

[45:07] Austin Campbell:
Jill concurs, emphasizing the potential risks of government overreach if Bitcoin is deemed a strategic asset. The conversation concludes with mutual acknowledgment of the complexities and uncertainties ahead for the crypto industry under the new administration.

Key Takeaways:

• Regulatory Clarity is Crucial: The crypto industry is eager for clear and reasonable regulations to facilitate growth and mainstream adoption without stifling innovation.

• Stablecoins at the Forefront: Stablecoins are seen as a pivotal element in modernizing financial systems, with predictions of significant integration into global markets.

• Balancing Act with the SEC: Defining what constitutes a security within the crypto space remains a contentious and critical issue, necessitating nuanced regulatory frameworks.

• Political Influence Matters: Shifts in legislative control, particularly with a Republican-majority Senate, are poised to influence the trajectory of crypto regulation more substantially than executive changes alone.

• Risks of Overregulation: While seeking regulatory clarity, the crypto industry must be wary of potential overreach that could undermine its foundational principles of decentralization and minimal interference.

This episode of Odd Lots offers a nuanced exploration of the intersecting worlds of cryptocurrency and politics, providing listeners with a comprehensive understanding of the challenges and opportunities that lie ahead for the crypto industry under the Trump administration.