How the Trump Administration Could Transform the Cryptocurrency Landscape

As Donald Trump prepares to reassume the presidency on Jan. 20, the cryptocurrency industry is abuzz with anticipation about the potential impact of his administration's policies. According to reports, industry leaders expect President-elect Trump to issue several crypto-related executive orders on his first day, with at least one anticipated to ignite a bitcoin price surge. College of Computing experts - associate professor and blockchain consultant Vassilis Zikas and Ph.D. student Agam Shah - discuss implications for the blockchain and cryptocurrency ecosystem.

A New Era for Blockchain Technology
Associate Professor Zikas emphasizes the fundamental differences between blockchain and the common architecture used by traditional financial systems like banks. While banks rely on private ledgers maintained by centralized entities, blockchain uses decentralized ledgers accessible to all participants. This transparency, he explains, is a double-edged sword: it enhances accountability but raises privacy concerns.

Zikas highlights blockchain's potential to revolutionize global financial transactions by offering a consistent, borderless mechanism for transferring assets. "The process of sending bitcoin from a U.S.-based user to a U.K.-based user is identical to transferring bitcoin domestically," he explains. This contrasts sharply with traditional international banking, which is fraught with delays and fees.

The associate professor also notes that Trump's previous administration had a mixed stance on crypto. Whilebeing cautious, it supported regulating initial coin offerings and funding blockchain research. In contrast, the Biden administration's stance, spearheaded by the Securities and Exchange Commission, created uncertainty in the crypto space, and is believed to have contributed to pushing crypto entrepreneurship out of the U.S. and into a prolonged "crypto winter."

Building a Regulatory Framework
Agam Shah, a blockchain researcher, underscores the importance of clear regulations in fostering crypto adoption. "A well-structured regulatory framework can encourage institutional participation by reducing uncertainties and risks while protecting retail investors," he notes.

He highlights the damage caused by unregulated practices, such as wash trading, which happens when you sell a security at a loss and buy a "substantially identical" security within 30 days before or after the sale. High-profile failures like cryptocurrency exchange FTX, eroded public trust, with many users losing money. Shah believes that the Trump administration's positive sentiment toward bitcoin, coupled with his administration's pro-crypto stance, could lay the groundwork for comprehensive policies that foster innovation while safeguarding investors.

Shah also points to advancements in blockchain technology, such as tools to detect fraudulent activities, as critical to maintaining market integrity. "Technological developments will play a pivotal role in ensuring transparency and fairness in the crypto space," he adds.

Navigating Challenges and Opportunities
Despite the optimism surrounding anticipated policies, Zikas and Shah suggest a cautious approach. Zikas stresses that users and policymakers need to be made aware of the reach (and limits) of the technology. For example, while blockchain can offer privacy benefits, common blockchain ledgers are not completely immune to techniques that can uncover identities. And, although absolute privacy is technologically feasible, it can facilitate illicit activities. Shah, meanwhile, stresses the importance of balancing innovation with market stability, particularly given the crypto market's volatility and the challenges posed by Basel III endgame - the latest update to global capital standards - set to take effect in 2025.

Looking ahead, both Zikas and Shah agree that clear and actionable policies will be essential for positioning the U.S. as a global leader in blockchain technology. As Trump's administration aims to transform the U.S. into a crypto powerhouse, the coming months will be pivotal in shaping the future of digital assets and blockchain innovation.

By fostering a balanced approach that combines regulatory clarity with technological innovation, the U.S. could solidify its leadership in the global crypto economy - while ensuring the ecosystem remains transparent and secure.