US: Trump 2.0 crypto & dollar plans

• On Saturday, former president Donald Trump will continue his outreach to the cryptocurrency industry and its supporters:
  • Trump will speak at the annual Bitcoin Conference 2024 in Nashville, Tennessee,
  • and will also host a high-dollar private fundraiser around the event.
    • Trump’s running mate JD Vance, the first holder of Bitcoin to run on a major party presidential ticket, will also attend the conference.
• We use this as an opportunity to recap what is known about a Trump 2.0 administration’s ‘plans’ for crypto and the US dollar:

• As is now well-known, the Trump-Vance campaign is running on a clearly pro-crypto platform:
  • According to reports from a June fundraiser,
    • Trump “touted crypto as important and stressed that he was very supportive of the sector,”
    • and that “the Biden-Gensler crusade against crypto will grind to a halt”
• …which is a notable departure from the crypto policy in Trump’s first administration, which was marked by rhetorical hostility:
  • “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” (Source)

• Given Trump’s recent positive statements, and Vance’s longstanding stance, we believe that a Trump 2.0 administration is likely to pursue crypto-friendly policy, including:
  • By curtailing the SEC’s pursuit of crypto litigation, either:
    • by demoting (i.e. removing as chair) current SEC Chair Gary Gensler…
      • a step Trump would be able to take,
      • though he would likely not be able to ‘fire’ Gensler entirely (i.e. from his position as a commissioner) until Gensler’s term ends in 2026,
    • …and appointing a more pro-crypto commissioner as chair,
      • a role for which strong crypto advocate Commissioner Hester Peirce would be the obvious choice, except for the fact that her current term is due to end in June 2025,
    • or, short of demoting Gensler, by:
      • pushing on Gensler to settle ongoing cases,
      • pushing on Gensler not to pursue further cases,
      • using the threat of demoting Gensler should he refuse to comply,
    • and by naming pro-crypto commissioners as vacancies arise.
  • By advocating for:
    • a strengthened self-custody regime,
    • Vance-sponsored legislation that would shield cryptocurrency firms (among others) from “ideological bias demonstrated by” regulatory agencies, including the SEC,
    • Vance-sponsored legislation that would likely provide the CFTC with enhanced oversight of crypto, limiting the SEC’s role,
    • a renewed effort at SAB 121 reform which was passed through Congress on a bipartisan basis, but was vetoed by President Biden,
    • most materially, a ‘Strategic Bitcoin Reserve,’
      • in other words, requiring the Federal Reserve to hold Bitcoin,
      • a plan for which Senator Cynthia Lummis (R-WY) is expected to announce at Saturday’s conference, ahead of Trump’s speech.
  • (One thing we do not expect Trump to pursue is a CBDC,
    • a measure which he is already – and very explicitly – on record against).

• However, we would argue that a Trump 2.0 would likely still have minimal direct success with crypto legislation, as:
  • Most of the legislation outlined above is unlikely to pass through a divided Congress.
  • Even SAB 121 reform, which in 2024 was passed on a bipartisan basis, may be less appealing to Democrats’ who do not want ‘to give Republicans a win’ on the issue under Trump.

• Instead, we would suggest that the ‘crypto-optimism’ surrounding the Trump campaign would more readily be supported by Trump policy priorities that are not crypto-specific but will serve as tailwinds to the crypto industry, including:
  • Deregulation writ large.
  • Energy promotion.
  • The pursuit (albeit likely unsuccessful) of a weaker dollar…

• The dollar’s value:
  • The Trump camp favors a weaker dollar.
    • This would likely only get truer if/as the dollar strengthens further as a result of a Trump administration’s tariffs, tax cuts, and industrial policy.
  • There are six main options for a Trump 2.0 administration to put downward on the pressure on the dollar:
    • Pressure the Federal Reserve into lowering rates and/or altering its balance sheet:
      • This is unlikely because:
        • Trump has already said he will not (try to) oust Jerome Powell.
        • Even if/when Powell is replaced, Trump would struggle to push a ‘policized’ candidate through the Senate’s confirmation process.
    • Instruct the Treasury Department to sell dollar reserves and/or expand debt:
      • This is unlikely for (at least) two reasons:
        • 1) Similar to above, the risk of market loss of confidence.
        • 2) Scale challenges: “One proposal for weakening the currency has been for the US to use the Treasury’s Exchange Stabilisation Fund. However the fund [only] has around $200bn in assets to buy foreign currencies, which […] would soon be exhausted” (Source)
    • Impose capital controls on inbound investment:
      • This is unlikely because:
        • The Trump administration welcomes the inflow of foreign capital (and associated manufacturing) into the US.
    • Cow foreign counterparts into a ‘Plaza Accord 2.0’:
      • This is unlikely, as:
        • Even Robert Lighthizer – who has reportedly entertained the idea – does not seem to believe in such a plan’s feasibility.
    • Impose tariffs (sticks) on countries who refuse to devalue their currencies:
      • This is unlikely in large part because:
        • Such tariffs could just as easily create a self-reinforcing loop of dollar strength.
    • Offer trade concessions (carrots) to countries willing to devalue their currencies:
      • “Scott Bessent, a hedge fund manager and prominent fundraiser for Trump, has talked of expanding the Biden administration’s “friendshoring” policy to create a tiered system among America’s partners, in which countries that help further the goal of a weaker dollar would be rewarded with trade advantages” (Source)
      • As heterodox as it may sound, this is an idea we will be investigating and monitoring closely.

• The dollar’s status:
  • The Trump camp seems divided on the dollar’s role as a global reserve currency, between…
    • Trump himself and much of his team, who value the ‘privilege’ of the dollar’s global status…
      • and have even reportedly considered using coercion to (try to) maintain it: “Discussions include penalties for allies or adversaries who seek active ways to engage in bilateral trade in currencies other than the dollar” (Source)
    • Vs. Vance, who has expressed concern about the ‘burden’ for the US…
      • “the strong dollar is sort of the sacred cow of the Washington consensus, but when I survey the American economy, and I see our mass consumption of mostly useless imports on the one hand, and our hollowed-out industrial base, on the other hand, I wonder if the reserve currency status also has some downsides” (Source)
  • Vance’s view has the benefit of coherence with a desire for a weaker dollar, but:
    • We do not expect those inconstancies to be reconciled, and
    • To the extent that one vision will dominate, it is more likely to be Trump’s.
    • Which begs the question of how seriously one might take his threat to ‘go after’ countries seeking to move away from the dollar; and while it may be tempting to dismiss the prospect out of hand, we will be investigating and monitoring this closely, as we suspect it may become a meaningful theme under a second Trump administration.