Intro Disclaimer: Any views expressed here are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions. Please do your own research.
Election Results Accelerate Velocity of the Inevitable
Donald Trump was elected as the 47th president of the United States, with expectations of an upcoming republican majority sweep in Congress. Objectively speaking and politics aside, a win for Donald Trump is a win for crypto.
Whether you’re pleased or disappointed with the election outcome, let’s cover 5 KEY implications and takeaways that could shape the crypto asset class over the next 4 years.
1) The crypto industry has a clear path towards establishing regulatory clarity, which will provide investors and developers with increased confidence to sponsor and build new and existing blockchains and protocols on American soil. The crypto industry should finally receive the much needed guidance to establish clear agency oversight and guardrails for proper registration and compliance for crypto projects and investors.
Two key crypto bills to keep an eye on:
a. The Financial Innovation and Technology Act of 2021 (FIT21) and
b. CBDC Anti-Surveillance Act (CBDCA)
Both acts have passed the House and now await approval in the newly Republican majority Senate. I expect a direct path towards congressional and presidential approval, providing crypto with a much needed federal stamp of credibility.
Despite Biden’s presidential veto this past summer of the revocation of SAB 121, a prohibitive rule that hinders financial institutions and banks from offering crypto custody services to clients, there's industry-wide confidence that the bill will be effectively revoked and financial institutions will soon begin adopting crypto solutions.
Key Takeaway: Cryptocurrencies further down the risk curve that have faced regulatory scrutiny but maintained strong fundamentals throughout the past several years will benefit from an improved regulatory backdrop.
2) The U.S. Treasury will “build a strategic Bitcoin reserve”, after U.S. Senator Cynthia Lummis of Wyoming successfully introduced the BITCOIN Act to the U.S. Senate and reaffirmed her positioning following the election outcome. With Congressional and presidential approval, the BITCOIN Act would establish:
a. Secure Bitcoin vaults by the Treasury
b. Carry out a 1-million Bitcoin purchase program to acquire a ~5% stake of the total BTC supply
c. Affirm self-custody rights for private holders
Key Takeaway: If passed, other countries could follow in the footsteps of the U.S. with Bitcoin becoming a globally recognized store of value.
3) Decentralized finance will thrive, and that starts with the demotion of Gary Gensler. The infamous crypto enforcement czar and chair of the Securities and Exchange Commission has been promised by Donald Trump that on the first day of his presidency, he would be removed as chair.
We await the accuracy of this promise but do not expect Trump to let a failing agency chair continue to spend taxpayer dollars on enforcement lawsuits that are consistently refuted in court; nor will that fly well in Musk’s Department of Government Efficiency either. I anticipate that Gensler will either step down, or be demoted, with the subsequent appointment of a more supportive pro-crypto commissioner such as possibly Hester Peirce (aka “Crypto Mom”) to be called upon.
More importantly, the Trump family has publicly announced the launch of World Liberty Financial, a new decentralized finance saving application that will leverage AAVE to provide stablecoin liquidity for ETH and BTC. In turn, the AAVEDAO will receive 20% of protocol fees generated by WLF’s V3 iteration.
Key Takeaway: With overlapping mutual interest in decentralized finance, Trump’s administration will help streamline access and increase adoption to on-chain financial products and services.
4) Stablecoins will support U.S. Debt and help provide demand for the U.S. Dollar. According to a16zCrypto’s 2024 State of Crypto Report, on-chain stablecoin volume hit $8.5 trillion in the 2nd quarter of 2024 (Figure 1), more than 2x that of Visa’s transaction volume.
Figure 1
Source: a16zCrypto
Objectively speaking, stablecoins have found significant product market fit and will provide demand for U.S. Debt. But how might you ask?
a. Citizens of emerging countries, such as Argentina and Nigeria, are becoming active users of dollar-denominated stablecoins
b. Dollar-denominated stablecoins make up >99% of stablecoins on blockchains
c. Leading stablecoin issuers such as Tether (USDT) and USDC (by circle) are backed by more than ~60% U.S. Treasury Bills reserves
d. USDT and USDC combine for ~$92 billion held in U.S. Treasuries
e. This makes stablecoins the 20th largest holder of U.S. treasuries, including countries, worldwide.
Source: a16zCrypto
Key Takeaway: The passing of CBDCA will ensure stablecoin issuance diversifies and expands across public blockchains while providing demand for U.S. debt and the dollar abroad. Stay focused on Layer-1 and Layer-2 coins that dominant stablecoin volume market share.
5) Keep an eye out for favorable crypto tax policy in the U.S.
The IRS currently treats cryptocurrencies as property for tax purposes, meaning if you sell or use your Bitcoin in a transaction, you must pay taxes on the appreciation of the asset since first being acquired.
Bitcoin is money. Crypto is currency. It logically and intuitively should not be taxed the same as the sale of your car.
Key Takeaway: Cryptocurrencies could benefit from new and favorable tax policy changes.
Thanks for reading and feel free to reach out with any questions of if you'd like to discuss in more detail!
Boomer Saraga | Founder/Crypto Investment Manager
Closing Disclaimer: This overview is for informational purposes only and is not representative of any guaranteed or future performance. Before making any investment decisions, individuals should consult their own advisors, including legal and tax advisor. While the information provided herein is believed to be accurate and reliable, none of Khelp, or any of their respective affiliates or representatives or any other person makes any representations or warranties, express or implied, as to the accuracy or completeness of such information.
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