WSJ Tech News Briefing: What Trump Means for Tech: Crypto Gets a Seat at the Table

Released on February 3, 2025

In this episode of WSJ Tech News Briefing, host Bell Lin explores the potential impact of President Donald Trump's second term on the technology sector, with a particular focus on the cryptocurrency industry. The discussion features insights from Tellis Demos, a writer for the Wall Street Journal's "Herd on the Street" column and co-host of WSJ's "Take on the Week" podcast. The episode delves into Trump's stance on crypto, regulatory implications, the role of banks, and the broader philosophical debates within the crypto community.

Trump's Stance on Cryptocurrency

Initial Enthusiasm vs. Official Actions

At [00:18], Bell Lin sets the stage by highlighting the initial excitement among crypto enthusiasts about President Trump's potential to usher in a new era for cryptocurrency. However, the conversation quickly shifts to assess whether these expectations have been met.

Tellis Demos explains, “He has not taken too many official steps with regards to crypto, but did sign an executive order that had a couple of key points” ([01:27]). These key points include:

1. Abandonment of a U.S. Digital Currency:

   • Trump ordered the government to cease work on an official U.S. digital currency, reversing initiatives explored during the Biden administration.

2. Facilitation for Crypto Companies:

   • The executive order directs government agencies to simplify the process for crypto companies to obtain bank accounts, aiming to ease financial operations within the industry.

3. Establishment of a Regulatory Working Group:

   • A working group has been formed to evaluate regulatory and legislative proposals concerning stablecoins and the overall crypto market structure. Demos elaborates, “Stablecoins, of course, are those tokens that are meant to sort of be fixed to the value of the dollar that are a big way to transact in the crypto space” ([01:27]).

Impact on Regulatory Bodies

Shifts in SEC and Other Agencies

At [03:02], Bell Lin brings up the potential changes within regulatory bodies, especially considering the tenure of former SEC Chair Gary Gensler, who had a stringent approach towards cryptocurrency.

Tellis Demos discusses possible scenarios under new leadership:

• Reduction in SEC Lawsuits: The SEC might halt ongoing lawsuits against crypto firms like Coinbase and Ripple, potentially easing the regulatory pressure.
• Redefinition of Securities: There may be a reevaluation of what constitutes a security within the crypto space, offering clearer guidelines for exchanges and investors.

Demos highlights a notable shift in approach by quoting, “Maybe that's not the way that the Gary Gensler led SEC wanted folks to be doing it” ([03:18]). This suggests a move towards more flexible and adaptive regulatory practices.

Implications for Banks and the Financial Sector

Banks' Cautious Approach to Crypto

At [05:22], Bell Lin probes into how Trump's policies might influence banks' involvement in cryptocurrency transactions.

Tellis Demos outlines several implications:

• Cautious Engagement: Banks are likely to approach crypto transactions carefully, evaluating the stability and behavior of crypto deposits. “Banks are going to be pretty cautious and deliberate about the ways that they do business in cryptocurrencies” ([05:35]).

• Competition with Traditional Banking: If stablecoins gain regulatory clarity and become widely accepted, they could become competitive alternatives to traditional bank deposits, posing a potential threat to banks' market share.

• Investment Banking Opportunities: On the upside, increased activities such as crypto companies going public or engaging in mergers would benefit investment bankers.

• Trading Desk Expansion: Clear regulatory guidelines might encourage banks to expand their crypto trading operations, although Demos does not anticipate this happening on a large scale in the near future.

Risks and Upsides of Deregulating the Crypto Sector

Balancing Innovation with Investor Protection

At [07:48], Bell Lin asks about the potential downsides and benefits of deregulating the cryptocurrency industry.

Tellis Demos provides a nuanced perspective:

• Downsides:

  • Increased Risk for Investors: Deregulation could lead to more volatile and unpredictable crypto assets, putting retail investors at higher risk. “It just brings more of these boom and bust assets to mom and pop investors and puts them at risk” ([07:56]).

• Upsides:

  • Growth Opportunities: Clearer regulations could stabilize established crypto businesses like Coinbase, Robinhood, Visa, PayPal, and Block, fostering growth and investment.
  • Investor Confidence: Legislative clarity might reduce uncertainties, encouraging more investments in crypto-related enterprises.

Demos acknowledges the complexity of the issue, stating, “I don't think it's a super straightforward answer” ([07:56]).

Trump's Position in Crypto's Philosophical Debate

Navigating Competing Visions for Crypto's Future

At [09:24], Bell Lin explores where President Trump stands within the broader philosophical divide in the crypto community.

Tellis Demos identifies two primary camps:

1. Decentralization Advocates (DeFi):

   • Propose crypto as a means of financial independence, minimizing government intervention. They favor digital currencies based on mathematical principles, independent of entities like the Federal Reserve.

2. Centralized Exchange Proponents:

   • View crypto as the future of financial services and Wall Street, advocating for more regulation to integrate crypto into existing financial frameworks responsibly.

Regarding Trump's alignment, Demos states, “it [Trump's administration's approach to crypto] is really going to be the story of the next few years” ([09:51]). Trump’s administration may oscillate between these philosophies, influenced by internal factions within the Republican Party. This balancing act could determine which vision for crypto gains the upper hand and how it affects the broader acceptance and regulation of cryptocurrencies.

Conclusion

The episode concludes with a comprehensive analysis of the intricate relationship between President Trump's policies and the cryptocurrency industry. While the executive order signals a degree of support by easing banking procedures for crypto companies, significant challenges remain in regulatory clarity and balancing the competing philosophies within the crypto community. The trajectory of cryptocurrency in the United States over the next few years will largely depend on how these policies are implemented and which factions within the administration influence key decisions.

Notable Quotes

• Tellis Demos: “He has not taken too many official steps with regards to crypto, but did sign an executive order that had a couple of key points.” ([01:27])

• Tellis Demos: “Maybe that's not the way that the Gary Gensler led SEC wanted folks to be doing it.” ([03:18])

• Tellis Demos: “Banks are going to be pretty cautious and deliberate about the ways that they do business in cryptocurrencies.” ([05:35])

• Tellis Demos: “I don't think it's a super straightforward answer.” ([07:56])

• Tellis Demos: “it [Trump's administration's approach to crypto] is really going to be the story of the next few years.” ([09:51])

For more insights and updates, tune in to future episodes of WSJ Tech News Briefing, your daily guide to the latest in technology and innovation.