Donald Trump's potential SEC chairman should tackle 5 issues
It’s time for Securities and Exchange Commission (SEC) Chair Gary Gensler to polish his resume. At a Bitcoin conference in Nashville on July 27, Republican presidential nominee Donald Trump vowed to oust crypto’s favorite supervillain in favor of a pro-industry replacement.
That’s good news for Web3 , but turning America into the crypto capital of the world isn’t as simple as saying “You’re fired.” Insatiable demand for tokenized dollars has given the US an invaluable head start, but Web3 still desperately needs investor protection and oversight. That’s exactly what the SEC exists to provide.
Trump should pick an SEC chair who understands this — and commits to five goals from the start.
Let Ether funds start staking
Spot Ethereum ( ETH ) exchange-traded funds (ETFs) finally hit the market on July 23, but staking — or locking ETH as collateral in exchange for rewards — is conspicuously absent.
PRESIDENT TRUMP: "ON DAY ONE I WILL FIRE SEC CHAIR GARY GENSLER...LET ME SAY THAT AGAIN...I WILL FIRE GARY GENSLER!" ‼️ pic.twitter.com/DyPRDCtBvG
— Autism Capital (@AutismCapital) July 27, 2024
Fixing this is easier said than done. The Investment Company Act of 1940 requires ETFs and mutual funds to promptly redeem shares for underlying fund assets on-demand — usually within the day. Staking makes that virtually impossible for spot ETH funds. Timelines for staked ETH withdrawals are unpredictable, often taking days to complete.
Related: Ethereum ETFs are coming — Here’s what you need to know
The SEC has exempted funds from this rule in the past. It needs to do the same for spot Ether. Crafting a thoughtful carveout will take time. Trump’s nominee should get started on day one.
Embrace on-chain compliance solutions
The SEC should take a similarly flexible approach elsewhere. Core functions of securities markets — such as reporting, clearing, and settlement — are subject to intense regulatory scrutiny, and rightfully so. They are also areas where blockchain excels.
Distributed ledgers automatically record and settle every on-chain transaction and are highly resistant to manipulation or fraud. The SEC knows this and — in at least one instance — already recognized on-chain ledgers as valid financial reports. Now, regulators should replicate this at scale, issuing comprehensive guidance so others can follow the same path.
Upgrade KYC and custody rules for Web3
The same goes for other compliance mandates, such as Know Your Customer (KYC) and custody. Today, self-custody wallets — such as Ledger and MetaMask — are regulatory black holes, off limits to most security tokens.
It doesn’t have to be that way. In the US, qualified crypto custodians (QCs) — which hold crypto for users in insured, segregated accounts — are already proliferating. They include Anchorage Digital, BitGo, Coinbase Custody, and Paxos, among others. Adding elements of self-custody — such as non-upgradable smart contracts and private keys — to existing rules for crypto QCs would only strengthen protections for investors.
Congressional gridlock is no excuse. These changes are largely achievable within existing laws. The core goals of SEC oversight are as relevant as ever. Blockchain technology simply achieves them in new ways. Mapping these new solutions onto the SEC’s existing frameworks will open up a world of possibilities for Web3.
Bring DEXs out of the shadows
Decentralized exchanges (DEXs) such as Uniswap and Balancer are the future of trading. They replace a costly chain of intermediaries — including custodians, brokers, clearinghouses, and transfer agents — with transparent, non-custodial smart contracts. Implemented properly, DEXs can cut costs, mitigate counterparty risk, and facilitate real-time, 24/7 trading.
Related: Trump's VP pick, JD Vance, could mean a new era for crypto
There’s one problem. Despite being in use for nearly a decade, DEXs are still almost completely unregulated. This is largely thanks to an ongoing tug-of-war between the SEC and the Commodity Futures Trading Commission (CFTC), which oversees commodity derivatives markets.
Fixing this is straightforward. The SEC should clarify what tokens, if any, are securities, set a clear registration path for the DEXs that trade them, and hand off the rest of the spot crypto market to the CFTC.
Crucially, DEXs should meet comparable standards to traditional exchanges for risk management, KYC and disclosures. But, as with other compliance rules, the SEC should fully embrace on-chain solutions wherever possible.
Dollarize the digital economy with RWAs
On-chain dollarization is the holy grail of US crypto policy , and the opportunity is wide open. Global demand for tokenized dollars clocks triple-digit growth rates year after year. Dollar-backed stablecoins — such as USD Coin ( USDC ) and Tether ( USDT ) — have already bought upwards of $100 billion of US government debt.
That’s only scratching the surface. Tokenized money market funds and other yield-bearing real-world assets (RWAs) are only beginning to gain a foothold in Web3. The handful of early entrants — such as BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) and Franklin OnChain US Government Money Fund (FOBXX) — are stymied by severe restrictions.
It’s time to reverse course. The SEC should actively foster a robust on-chain market for USD-backed RWAs. These tokenized securities must fully leverage blockchain’s capabilities. They must be tradable on DEXs, accessible to user-managed wallets, and open to Web3 developers.
A truly America-first crypto policy should prioritize dominating the digital economy for decades to come. In that, America’s robust financial regulatory framework is an invaluable asset. Trump should pick an SEC chair who understands this — and is ready to act.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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