During his 2024 campaign, US President-elect Donald Trump made several promises to the cryptocurrency community about initiatives that could reshape the industry. He envisioned a market where crypto could thrive, with a national government heavily invested in Bitcoin and an oversight framework that would not stifle innovation. Trump even hinted he would get rid of officials, such as US Securities and Exchange Commission Chairman Gary Gensler, who continued to wield a heavy hand in the area of crypto regulation.
With the election secured, Trump is now in a position to fulfill his promises. However, experts in the crypto space suggest that encouraging crypto growth will require striking a delicate balance.
“Some lawmakers want to protect consumers and the nation from threats, while others fight for the industry’s freedom to grow without many restrictions,” says Patrick Gruhn, the founder and CEO of Perpetuals.com. “The conflict of interest between the two competing policies promoting transparency on the one hand and privacy on the other is a significant issue that must be addressed.”
Perpetuals.com is a MiFID II market infrastructure startup for crypto derivatives trading that empowers perpetual futures trading without boundaries. Gruhn brings considerable experience in the digital asset space to the venture, including experience as a Partner at K&G Lawyers, a Swiss firm specializing in digital assets, and as co-founder of DigitalAssets.ag — the company that made tokenized stocks available with an approved security prospectus.
Taming the tension between transparency and privacy
The tension Gruhn mentions — between transparency and privacy — is one of the more thorny problems legislators face as they seek to build a secure crypto framework. Transparency is inherent in the blockchain technology that supports crypto. Yet, the identity of those conducting transactions is often shielded, protecting the privacy of crypto users and allowing them to remain anonymous.
Regulations governing financial transactions typically seek to identify users to discourage illegal activity. Know Your Customer (KYC) regulations, for example, require banks and other financial institutions to take steps to verify the identity of their customers.
In the crypto space, anonymity is promoted through a number of practices, including non-KYC exchanges that allow users to conduct trades without revealing their identity. Regulations that would outlaw such exchanges could be promoted to address growing concerns over crypto being used by criminals looking to conceal their identities.
“Certain lawmakers have proposed the idea of rules that could require companies to disclose the details of the cryptocurrency ransom payments they process,” Gruhn says. “Such legislation may improve cybersecurity by boosting accountability. Nevertheless, it could face some resistance from industry players due to concerns over operational risk, reputational risk, or even the potential of disclosing other personal information during the process.”
Finding a solution for decentralization
Most traditional financial regulations rely on the centralized nature of conventional transactions. The regulations enlist financial institutions in their efforts to keep transactions secure, imposing duties such as customer identification and the reporting of suspicious transactions.
Crypto’s decentralized nature challenges that approach. Thanks to blockchain, crypto transactions can be secured without the need for a centralized authority. Additionally, reports show that the popularity of decentralized crypto exchanges is on the rise, perhaps in response to concerns over the possibility of regulations that would threaten anonymity.
Gruhn believes the increased talk of KYC and anti-money laundering regulation in the crypto space could spark more interest in decentralized exchanges, self-hosted wallets, and other tools designed to keep users anonymous. “Pushing for less anonymity could lead to debates on the feasibility of such implementation,” he says, “with questions arising on how such measures would be effective with crypto’s decentralization.”
Decentralization also makes it challenging to impose liability when exchanges fail to protect customer accounts from unauthorized access. Decentralized exchanges rarely have a traditional business structure with a CEO or board of directors who could be held accountable. They also typically operate globally, which makes it difficult to establish jurisdiction. “Assigning liability in cases where crypto is stolen or held for ransom is likely to be a contentious issue for lawmakers,” Gruhn says.
Overall, Gruhn sees a second Trump presidency as a positive development for the crypto industry, with the potential to spur healthy growth. “I expect a way more business-friendly environment for the crypto industry from the second Trump administration,” he says.
Gruhn believes some of the biggest winners will be Level 1 projects like Ethereum and Solana and the ETFs built on those platforms, which have struggled under the aggressive enforcement stance of the current SEC leadership.
“I expect enforcement actions to shift away from the artificial arguments that stretch the definition of security law — as we have seen in the last four years,” Gruhn says. “The future will focus more on crypto projects that cross the line into the regulated securities or derivatives area.”
