TD Cowen's Prediction on U.S. Crypto Regulation Under Trump

The research division of investment bank TD Cowen predicts a potential shift in the regulatory landscape for crypto in the U.S. with the incoming Trump administration—though it remains uncertain, according to a note published on Monday.

As the political landscape will be dominated by a Republican-controlled Senate and House, albeit by a slim margin, analysts believe President-Elect Trump can capitalize on his "political capital" to advance an agenda focused on economic reform, trade, and lower taxes.

> "We believe crypto enforcement will likely be placed on hold once Trump names a new SEC chair, regardless of whether Gary Gensler resigns his seat as SEC commissioner," the researchers noted. "This doesn’t mean crypto will be without SEC oversight; we expect a new chair to reassess current cases and seek clarity on compliance for crypto companies."

Despite being a former bitcoin skeptic, Trump appealed to the crypto community, gaining support from influential figures such as the Winklevoss brothers and Coinbase CEO Brian Armstrong.

During his campaign, Trump launched multiple NFT series and made several promises related to crypto, including pardoning Silk Road founder Ross Ulbricht and dismissing Gary Gensler, the SEC chair.

The TD Cowen researchers foresee an increased possibility of Congress crafting and passing crypto-focused legislation during Trump's second term. Congressional Republicans and "Team Trump" might address how stablecoins fit into the compliance framework.

There are two main proposals for regulating stablecoins: creating a specific bill or integrating the issue into broader crypto market structure legislation. Either path could enable banks to issue stablecoins, pending liquidity and consumer protection requirements. While Rep. Maxine Waters has been collaborating on a bipartisan bill for three years, the researchers are skeptical about its success until 2025 due to the political landscape.

A broader market structure bill would define which crypto assets are considered securities and establish the process for a token transitioning from a security to a commodity.

However, according to the researchers, crypto may not be a priority for Team Trump initially, given their focus on extending tax cuts and addressing tariffs and trade.

Concerns over AML/BSA compliance and crypto’s involvement in sanctions evasion, drug/human trafficking, and terrorist financing could further delay political progress. The researchers argue, "The more the industry dismisses government oversight, the more challenging it will be to strike a bipartisan deal."

They emphasize that embracing AML/BSA compliance would bolster the chances of crypto market structure legislation, particularly condemning technologies that obscure crypto origins.