What a Second Trump Term Would Mean for Bitcoin
The Trump administration has not pursued regulation of cryptocurrencies, although agencies are dealing with crypto’s impact
/NOVOSTIVL/ The 45th President of the United States, Donald J Trump, has used Twitter to vent about a great many things over the course of his nearly four years in office - and yes, that includes Bitcoin.
Granted, his swipe at the leading cryptocurrency was decidedly tame for the President of the United States, who has railed against many other subjects during his four years in office. Still, Trump tweeting “I am not a fan of Bitcoin” in July 2019 could have been viewed as setting the tone for significant US regulation and scrutiny of crypto assets.
Arguably, however, that isn’t what has happened. While Trump himself may have a personal antipathy towards Bitcoin and other cryptocurrencies, the Trump administration has taken a broadly pragmatic stance towards crypto.
When approached by Decrypt for an official crypto platform, the Trump campaign - like that of his Democratic rival, Joe Biden—did not respond. Nevertheless, it is possible to look back over the last for year and extrapolate how crypto could fare under a second Trump administration.
“We have only one real currency in the USA”
Trump’s tweet thread on crypto was a one-time thing: a missive seemingly inspired by word of Facebook’s Libra stablecoin play, which itself has since been significantly reworked in the face of a global backlash from regulators.
“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated crypto assets can facilitate unlawful behavior, including drug trade and other illegal activity,” Trump tweeted in full.
“Similarly, Facebook Libra’s ‘virtual currency’ will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International,” he continued in a thread. “We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!”
Trump’s flag-waving nationalism isn’t new or surprising, given both his position and other statements. It also recalls statements from his top economic advisor Larry Kudlow, who called for “King Dollar” policies to boost the standing and value of the US dollar in early 2018, prior to joining Trump’s administration. Trump’s comments recall those of Kudlow writing for CNBC back in 2014, although it’s true that some early naysayers have come around on crypto.
“Bitcoin is not real money,” Kudlow wrote. “It is not a reliable medium of exchange, nor is it a reliable store of value. It has no central bank regulation, network operations or even centralized issuance. And because of its wild price fluctuations, Bitcoin can never be a reliable payment system.”
It’s true that as Trump’s first term progressed, we have seen a greater focus on cryptocurrency from government agencies—including increased IRS scrutiny towards taxpayers reporting crypto holdings, action from the SEC cracking down on what it sees as illegal securities offerings in the form of initial coin offerings (ICOs), and multiple agencies stepping up their pursuit of crypto-tracing tools.
However, cryptocurrency has grown dramatically during Trump’s time in office, from a market cap of just over $17 billion when he took office in 2017 to nearly $359 billion today, according to CoinMarketCap. Crypto has become much more widely used, both for legal and illegal means, so it makes sense that regulators and government agencies would have to reckon with it at some point.
For the most part, they’re catching up with the use of the technology and its implications, rather than expressly cracking down on Bitcoin or cryptocurrency in any way. Trump reportedly told Treasury Secretary Steven Mnuchin to “go after Bitcoin” in May 2018, according to former National Security Advisor John Bolton’s recent book The Room Where It Happened, but we haven’t seen any concerted effort towards regulation. It has largely been a hands-off approach that Carlton Fields attorney Drew Hinkes believes will continue should Trump be elected for a second term.
“Executive agencies have been underfunded under the current administration. Although both the President and Secretary of Treasury have been outwardly hostile to cryptocurrencies like Bitcoin, neither took strong action to bar it or otherwise materially limit its use,” Hinkes told Decrypt. “I expect more of the same, but amplified. Given the current administration’s hostility to funding executive agencies, I would not expect a new wave of enforcement or the issuance of any new guidance.”
“I would not expect a new wave of enforcement or the issuance of any new guidance.”
Just in the last couple of weeks, however, there has been more pointed guidance from government agents on how to contend with cryptocurrency. Earlier this month, the United States Treasury Inspector General for Tax Administration released a report suggesting that the IRS isn’t doing a good enough job overseeing crypto exchanges.
In the same week, the US Department of Justice Attorney General William Barr issued an 83-page “Cryptocurrency Enforcement Framework” for the agencies under his command. “Today, few technologies are more potentially transformative and disruptive - and more potentially susceptible to abuse - than cryptocurrency,” it reads. “Indeed, despite its relatively brief existence, cryptocurrency technology plays a role in many of the most significant criminal and national security threats that the United States faces.”
While the report points to crypto’s role in facilitating terrorism, the drug trade, child pornography, and other illicit activities, it’s not all negative. “For cryptocurrency to realize its truly transformative potential, it is imperative that these risks be addressed,” the Justice Department report also suggests. However, Shyft Network co-founder Juan Aja Aguinaco tells Decrypt that he believes the report lays the groundwork for significant challenges ahead for crypto stakeholders.
“The DOJ’s Regulatory Enforcement Framework and its statement on end-to-end encryption are pretty clear messages for the crypto industry as to the way that they are going to treat cryptocurrencies regardless of the jurisdiction,” he said.
“The Framework spreads the burden of compliance on most, if not all participants. The implications for crypto, in general, are heavy as any single point of contact with a US server, UI, entity, etc. could bring about oversight from US regulators,” Aguinaco added. “For other, more specific blockchain developments, like DeFi, stablecoins, and enhanced privacy tokens, this framework constitutes a complicated and potentially destructive compliance requirement.”
Nevertheless, there are some crypto fans working in Trump’s agencies. The most prominent is undoubtedly SEC Commissioner Hester Peirce, affectionately known as “Crypto Mom,” a Trump appointee who, earlier this year, was sworn in for a second term. Although she recently admitted that she’s still trying to get her colleagues to come around on crypto-related matters, she has written dissents criticizing SEC decisions against crypto companies and has proposed a “safe harbor” plan to help firms avoid SEC entanglements.
Could Trump’s tax policies benefit crypto holders?
CoinTracker co-founder Chandan Lodha tells Decrypt that Trump’s proposed tax policies could benefit crypto hodlers. “President Trump's tax plan is more vague [than Biden’s], though he has mentioned the idea of cutting the capital gains tax rate from 20% to 15%,” said Lodha. “This would reduce the amount of tax paid for all long-term cryptocurrency holders.” On the other hand, President Trump has made it clear that he's not a fan of Bitcoin and other cryptocurrencies.”
Of course, the ongoing economic impact of the pandemic and government stimulus packages can’t be overlooked. Artem Bespaloff, co-founder and CEO of mining hardware marketplace Asic Jungle, suggests that additional stimulus could boost inflation for the US dollar, ultimately pushing more demand for Bitcoin.
“Whether it is a Trump or Biden administration, we will most likely see a continuation of money printing and inflation in general,” he said. “The Fed has signalled that it wants to overshoot the annual 2% inflation target to balance out zero rates. Democrats and Republicans have both shown their intention to move forward with fiscal stimulus, which will likely reflect positively on the price of Bitcoin, either before or after the election.”
Pair that with Trump’s combative attitude towards other governments and unwillingness to unite the country, said Shyft Network’s Aguinaco, and the value of Bitcoin could continue to rise during a second Trump term.
“Trump has been very effective at building a dividing wall between the US and the rest of the world, and between his own followers and the rest of the US. Divisiveness, along with a poorly-managed pandemic, does not bode well for the US economy,” he said. “These factors may push new users towards BTC as a hedge or means to lower their exposure to swings in the US markets. However, the correlations between the governing party and the rise or fall of the markets and other economic indicators should not be taken as indicators of short-term moves.”