OpinionHow Trump might transform crypto regulation
Opinion
How Trump might transform crypto regulation
"Trump’s return presents a golden opportunity for the blockchain world. However, it’s essential that this opportunity is accompanied by a careful balance between fostering growth and preventing misuse," writes Lior Lamesh, co-founder and CEO of GK8, acquired by the U.S.-based Galaxy.
The crypto industry has reached a pivotal moment. On the one hand, we’re witnessing rapid growth in blockchain technologies, investments, and global interest in digital assets. On the other hand, regulation—especially in the United States—has swung between heavy-handed enforcement and paralyzing uncertainty. Donald Trump’s return to the White House this month could fundamentally reshape this dynamic. As someone closely following developments in the field, I believe Trump could introduce a fresh approach that may serve as a turning point for the industry. Yet, it’s critical to recognize that this shift will come with both opportunities and risks.
Trump: A growth engine for the crypto industry?
While Trump hasn’t been a strong advocate for digital assets historically, he appears ready now to support this market. Reports suggest that his administration will promote legislation providing regulatory clarity for digital asset trading platforms, financial institutions, and banks, easing the entry of new players into the market.
In this context, custody technologies such as impenetrable wallets, multi-signature solutions, and MPC (multi-party computation)—which offer institutional-grade protection for digital assets—will likely become central. As regulations become clearer and investor confidence expands, demand for these solutions, particularly in the institutional space, is expected to grow.
What does this mean for Bitcoin and the crypto market?
One immediate effect of positive regulatory changes could be a dramatic impact on digital currency prices. Bitcoin, for instance, which has already seen a substantial rise in recent months, surpassing $100,000, might continue to reach unprecedented heights, restoring public trust in digital assets.
Beyond this, changes could lead to breakthroughs in other areas, such as asset tokenization, new blockchain protocols, and innovative projects. With more flexible regulations enabling the crypto market to operate without unnecessary constraints, we could see a new wave of innovation across industries like finance, real estate, and technology. At the same time, challenges in areas like DeFi (decentralized finance) and custody will become more significant, requiring advanced technologies that balance security, accessibility, and functionality.
The risks of overly lenient regulation
Alongside the potential benefits, it’s important to consider the challenges and risks associated with these changes. Historically, markets with weak regulation have often become breeding grounds for fraud, cyberattacks, and instability. If the Trump administration loosens restrictions without implementing proper oversight mechanisms, the market could succumb to dangerous levels of speculation.
Moreover, significant regulatory changes in the U.S. could directly influence global regulatory approaches. Regions like the European Union, Japan, and China might feel pressure to adapt their regulatory frameworks accordingly, potentially creating chaos in global markets.
Here are some key risks associated with loosely defined regulations:
- Increased exposure to cyberattacks: Ambiguities in regulation—such as requiring a percentage of digital assets to be stored in “impenetrable” or “cold” wallets without clearly defining these terms—can create gray areas. These vulnerabilities could expose platforms to cyberattacks, theft of digital assets, and reputational damage, ultimately affecting the broader economy. For example, in May 2024, the Japanese crypto platform DMM suffered a $308 million breach despite operating under supposedly strict regulations requiring 95% of assets to be stored offline. However, without a clear definition of situations where an internet connection is necessary to retrieve input from the blockchain to create a transaction, room for interpretation arises. As a result, digital assets were stored in solutions with some level of exposure to the internet, and the implications are evident.
- Stalled institutional adoption: In the absence of clear definitions and structured regulations, there is a high likelihood that institutions will hesitate to move forward. Major banks are eager to join the game and understand that the future lies in digital assets, but they will not risk public trust or their reputations. This hesitation could lead to a state of stagnation.
- Failures in complex scenarios: In a nascent industry, hasty regulations may overlook critical areas like risk management and contingency planning. For instance, Europe’s new regulatory framework, DORA, which took effect recently, mandates that any entity managing digital assets must be equipped with two distinct custody solutions—a primary solution and an alternative backup solution. However, such measures require comprehensive definitions to ensure success.
- Heightened money laundering risks: While blockchain technology is public and transparent, it has long been exploited by malicious actors for untraceable fund transfers. Without clear KYC (Know Your Customer) protocols and AML (Anti-Money Laundering) measures, the crypto market risks becoming a haven for illicit financial activities.
A welcome change—But with caution
Trump’s return presents a golden opportunity for the blockchain world. However, it’s essential that this opportunity is accompanied by a careful balance between fostering growth and preventing misuse. Striking that balance between innovation and responsibility is critical for ensuring the future of decentralized finance. For this to succeed, we need responsible regulatory leadership that encourages growth while securing the market, alongside advanced security technologies that can support the transition.
Lior Lamesh is the co-founder and CEO of GK8, acquired by the U.S.-based Galaxy.
