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

Summary

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.

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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.

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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])

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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.

Transcript

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[Bell Lin]

Welcome to Tech News briefing. It's Monday, February 3rd. I'm Bell Lin for the Wall Street Journal. We are exploring what President Trump's second term could mean for the tech industry over next four years and beyond Crypto Bulls and crypto enthusiasts had been excitedly cheering on President Trump's return to the White House, hoping it heralded a new era for cryptocurrency. But has that played out so far? And why are Trump and the First Lady's so called meme coins getting dragged into the mix? Tellis Demos, a writer for our Herd on the street column and the co host of WSJ's take on the Week podcast, tells us how Trump's appointees might alter the way crypto is regulated and why There seem to be more questions than answers right now over crypto's future. Okay, tell us. The crypto tech community is pretty thrilled that President Trump seems to be a big supporter of their cause. What do we know about Trump's stance on crypto?

[Tellis Demos]

Well, certainly we know that he personally has a meme coin, as does Melania, that got a lot of attention in the early days of the administration. But since then 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. One is that he basically has ordered the government to abandon any work on an official U.S. digital currency. That was something that they had been exploring in the Biden administration. It also directs government agencies to make it easier for companies in the industry to get bank accounts. It also has a working group that is going to look at like regulatory and legislative proposals for stablecoins and the crypto market structure. 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 and then market structure. I would guess what that refers to is, is some of the issues that really have bedeviled cryptocurrency companies like Coinbase and others, which is that the SEC has previously said that they are running exchanges that they shouldn't be, that they are listing securities that they aren't. So a lot of those things have been the big issues for the cryptocurrency industry. And so the executive order is at least the beginning of a process to start to change direction on that. But it will require at some point either legislation working with the Republican Congress or at least, you know, new leadership at the sec, CFTC and other agencies who will change some of the things that they can change directly.

[Bell Lin]

And we know that the former SEC chair, Gary Gensler had cracked down on the cryptocurrency sector. What do you think could happen now with new leadership for the agency? As we're talking about having to push these changes through the appropriate regulatory bodies?

[Tellis Demos]

Certainly the agency could theoretically sort of drop or stop making arguments in lawsuits that are ongoing, again with companies like Coinbase and Ripple and others. It could also look to not push forward with some of the ways it was defining what securities are and aren't. Some of those things are a bit discretionary and are being tested in court. One comment that caught my attention was the CEO of Coinbase recently saying, look, there are many, many, many sort of coins that come out and that it's not really possible for Coinbase to individually look at all of them. And what it might like to do is have more of a way of saying, look, we're going to list coins and then remove things that people flag as problematic. That was definitely not the way that the Gary Gensler led SEC wanted folks to be doing it. Maybe that's an example of sort of where things will move a little bit more of a do something and then maybe pull it back rather than having to sort of pre vet everything that investors see through these platforms.

[Bell Lin]

Coming up. How could President Trump's policies alter the way in which banks get involved in crypto? And where does he fall in the philosophical camps that divide the crypto sector? That's after the break.

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[Bell Lin]

Banks are looking to get into the business of crypto transactions if they are legitimized as a form of payment under President Trump. Tell us a little bit about the implications of this for the financial sector.

[Tellis Demos]

Banks are going to be pretty cautious and deliberate about the ways that they do business in cryptocurrencies. Banks are looking very carefully at all kinds of deposits across their businesses and saying how likely are these deposits to one just up and walk away one day? They are trying to understand how crypto deposits behave. So even if banks feel better about crypto from a regulatory point of view, there are still just brass tax financial questions they have about banking. Crypto companies also, in some ways crypto is competitive to banking. Like if stablecoins really do become a. They're already regulated to some extent. But you know, if the rules make it clear that stablecoins are a place that you can keep lots of money and that more people feel good about keeping money. And not just that, but to earn a yield on that money. Again, banks have struggled with competition from money market funds which have been around for many years for people's deposit money. Are stablecoins just going to be another place where people want to put money instead of banks? If crypto companies are. Crypto companies have been very limited in the lending and other things that they can do. Again, by the way the SEC has approached things, if all of those guardrails or sort of those limitations are removed again, do banks worry about losing business to crypto companies? I'm not sure. I'm not sure that banks will necessarily welcome this with open arms. Of course from like a Wall street investment banking point of view, yeah, if crypto companies, more of them are going public, if they're merging, if they're raising money, et cetera, that's obviously good for bankers. That keeps them busy. But just from a pure like kind of day to day deposits and lending point of view, I'm not sure that it's good for banks. Would more banks trade cryptocurrencies through their trading desks if it was clear to them that they were not at any risk of running afoul of anti money laundering rules of trading things that, you know, banks are broker dealers. They have to be careful about the things that they trade based on the way they're regulated. If crypto is sort of officially, if certain coins are officially blessed as things that they can trade in, maybe they'll do more of that through their trading desks. But I wouldn't expect to see that as like a big needle moving development for banks in the near future.

[Bell Lin]

Got it. And in a nutshell, can you describe the downsides or risks as well as upsides to deregulating the crypto sector?

[Tellis Demos]

I would say that critics of crypto or people who at Least don't want to fully unleash it on the investing public would say that it just brings more of these boom and bust assets to mom and pop investors and puts them at risk. However, I would also say that if you were an investor in a crypto company like Coinbase, to an extent Robinhood, where many people trade crypto and would like to be bigger in many of those businesses, if you were, you know, investor in a payments company that has explored crypto the likes of like Visa, PayPal, block, the parent of square and cash app, maybe it de risks those companies to an extent because then maybe you can more firmly say, yes, they have a real business in whatever it is payments that is crypto based. And you know, maybe a year or two ago you'd have said, yeah, I don't really want to put too much value on those businesses because heck, they could go away because Gary Gensler says so, or something like that. Now you say, you know what, look, there's a new piece of legislation that gives absolute clear road ahead for those businesses. And so, yeah, so actually I see them as a growth opportunity. So I would say that it probably diminishes the risk in some respects to those kind of companies betting on crypto. But again, if, yes, if everyone is every day being presented with the opportunity to invest in hundreds or thousands of different meme coins, the risk of picking a bad one, I guess, goes up. So again, I know we've come back to this a couple of times. I don't think it's a super straightforward answer.

[Bell Lin]

That is certainly fair. And this may be another question where there's not a straightforward answer either. But President Trump, where do you think he falls on this fundamental debate dividing the world of crypto? You have these sort of two opposing camps, one in which tech enthusiasts see crypto as a means of financial inclusion, and the other, these speculative investors who see it as a means to monetize ideas and memes.

[Tellis Demos]

I agree that there is a split in the crypto world and here's how I would think about it, that is maybe useful for thinking about the Trump administration and maybe where it falls and why Trump Coin in some respects represents a different sort of pathway than maybe some other people in the cryptocurrency industry who actually don't call it deregulating. They're asking what they say for regulation, right? We want more rules of the road to show that we are a responsible player. So I would look at it this way. On the one hand, you have people who think that cryptocurrency is. And I would say this is in the spirit of a lot of mag, which is like, get the government away from me. Don't tell me what to do. I don't trust government backed currencies. There should be a digital currency that is based on math and, you know, an open market for this currency. I don't want, you know, a currency where the Federal Reserve can decide the interest rate and affect its value. There's that and those people would say is a path to financial inclusion and opening up the financial system. There are other people that see crypto again as a sort of the future of financial services, a business that the future of Wall street is going to be crypto based and banking. And so those people would like more regulation in a lot of ways. And so you have the DeFi world versus the sort of centralized exchange world. And so where Trump falls on that is really going to be the story of the next few years. And which of those two camps have the ear of Republicans in the administration? And will there be different factions right within that party? We see that this conflict sometimes the sort of the Trump movement of, you know, there's, there's a populist instinct, right? Trump sometimes talks about things like capping credit card interest rates at the same time they want to unleash Wall street and be business friendly. And capping credit card interest rates is not what the banking industry would like to see. This isn't new to Trump and MAGA ism, but you're absolutely right that in crypto there are two pretty different philosophies at work. And it will be very interesting to see who wins and who loses and more importantly, what does the loser end up saying and feeling and what does that do to the sort of big tent that Republicans have built at the moment?

[Bell Lin]

Telus Demos is a writer for our Heard on the street column and he's a co host of WSJ's take on the Week podcast, which you can catch every Sunday. Check out the latest episode now, wherever you get your podcasts. And that's it for Tech News Briefing. Today's show was produced by Julie Chester Chang with supervising producer Katherine Milsop. Logging off, I'm Bell Lin for the Wall Street Journal. We will sign back in this afternoon with TNB Tech Minute. Thanks for listening.

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