Former President Donald Trump announced that his 2024 presidential campaign will accept crypto donations. This is a big change from his previous skepticism about digital assets. Meanwhile, the Financial Innovation and Technology for the 21st Century Act (FIT21), which will clarify the regulatory roles of the SEC and CFTC, is gaining support ahead of a House vote. SEC Chair Gary Gensler strongly opposes the bill, and warned that it will create regulatory gaps and undermine investor protections.
Trump Turns to Crypto for Campaign Funding
Former United States President Donald Trump announced that his 2024 presidential campaign will accept cryptocurrency donations. The campaign launched a fundraising page using the Coinbase Commerce product, allowing supporters to donate in quite a number of cryptocurrencies, including Bitcoin, Ether (ETH), Dogecoin (DOGE), Shiba Inu (SHIB), XRP, USD Coin, Solana (SOL) , and a few others.
On May 8, Trump promised at a NFT supporter dinner that donations to his campaign could be made in crypto. With less than six months until Election Day, Trump is the presumptive Republican nominee and will very likely face President Biden, the presumptive Democratic nominee.
Trump has agreed to meet Biden for televised debates on Jun. 27 and Sept, 10 on CNN and ABC, respectively. These debates could be the first in-person encounters between the two candidates since the 2020 election.
Despite now accepting crypto donations, Trump’s campaign website does not mention digital assets or blockchain in its 'issues' section at all. How President Biden will respond to this is anyone’s call as he very rarely speaks publicly about cryptocurrencies.
Trump’s crypto donations announcement came as a jury in his New York criminal trial prepared for deliberations, where he faces charges of allegedly falsifying business documents related to a $130,000 payment to adult film star Stormy Daniels. He also faces charges in Georgia and the District of Columbia for allegedly trying to overturn the 2020 election results, and in Florida for allegedly mishandling classified documents.
In February, a judge ordered Trump and his companies to pay $355 million in disgorgement for fraud. A New York judge also ordered Trump to pay over $83 million related to a defamation lawsuit brought by author E. Jean Carroll in January.
After leaving office in 2021, Trump was very open about his skepticism about Bitcoin. He even labeled it as a “scam” and called the U.S. dollar the “currency of the world.” Additionally, Trump stated in January that he will strongly oppose the creation of a CBDC in the United States
Now, it seems like Trump has changed his tune quite a bit leading up to the 2024 elections where the crypto industry is becoming an increasingly relevant factor.
FIT21 Act Gains Support
While all this is happening, US lawmakers have their hands full with the FIT21 vote. So far, it seems like there is increasing support for the Financial Innovation and Technology for the 21st Century (FIT21) Act. The act will clarify the roles of financial regulators with regards to digital assets, and it is set for a floor vote on May 22.
On May 21, North Carolina Representative Wiley Nickel urged his colleagues to support the bill. He firmly believes that the bill could prevent incidents like the devastating collapse of FTX. According to Nickel, Congress still has to establish a regulatory framework for cryptocurrencies, but is now only relying on outdated securities laws.
The FIT21 Act will define the regulatory responsibilities of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over cryptocurrencies. This bill will also slow the SEC's current approach, which is often criticized as "regulation by enforcement."
The SEC has filed lawsuits against many major crypto companies, including Ripple, Kraken, Coinbase, and Binance, as well as people associated with them.
Despite strong opposition from Democratic leadership, the bill has received strong support from people like former House Speaker Nancy Pelosi. Reports suggest that while Democratic leaders are not actively campaigning against the bill, they are also not pushing for its defeat.
The House Committee on Rules discussed the FIT21 bill, on the afternoon of May 21. Now, a full House vote is expected to happen on May 22. This vote comes very shortly after both the House and Senate passed a crypto-focused resolution that overturned an SEC rule requiring banks to hold customers' digital assets on their balance sheets.
FIT21
If enacted, the bill will modify the 90-year-old Howey test, which is a legal standard used to determine what constitutes a security. In essence, the bill will effectively reduce the SEC’s oversight of cryptocurrencies.
The crypto industry is mostly open minded about FIT21 as it could clarify the ambiguous and complicated regulatory framework. Also making the crypto community smile is the fact that Mark Hays, a senior policy analyst with Americans for Financial Reform, stated that the bill would establish a regulatory regime that will largely be governed by the CFTC, which has been much more favorable to the industry.
On the other hand, Democrats Maxine Waters and David Scott oppose the bill. Financial reform advocates and anti-crypto Democrats argue that FIT21 will dismantle decades of financial regulations for the benefit of the crypto industry.
SEC Chair Warns Against FIT21
Also not happy with FIT21 is SEC Chair Gary Gensler. Gensler stated that FIT21 will create regulatory gaps and undermine many years of precedent when it comes to the oversight of investment contracts, putting investors and capital markets at great risk.
According to Gensler, the bill disregards established regulatory practices for investment contracts, challenges the SEC’s ability to certify digital commodity issuers, ignores Supreme Court precedent in the Howey Test, and removes critical investor protections. He also pointed out that U.S. securities laws that were developed after the Great Depression, and are designed to protect consumers through mandatory disclosures and regulatory oversight, which the crypto industry has actively resisted.
Gensler also criticized the bill for excluding blockchain-recorded investment contracts from the statutory definition of securities, which ends up stripping them of federal securities law protections.
He also touched on the fact that courts have ruled that many crypto assets are offered and sold as securities, a fact that FIT21 seeks to deny. The bill’s provision allowing companies to self-certify their issuance of "digital commodities" gives the SEC only 60 days to assess these assets, which he says is not enough time considering the sheer volume of digital assets.
On top of all of this, Gensler also argued that the bill's definition of a digital commodity ignores the Howey Test and the economic realities of the assets, which increases risk to the public. He also warned that the bill's framework for investor protection and the exclusion of exchanges could further elevate risk.
