The cryptocurrency and decentralized finance (DeFi) industries are currently undergoing major shifts in their legal and regulatory undercurrents. These changes are most significantly influenced by the recent shift in the Trump administration’s overall stance. Key developments include significant token allocations, regulatory requests from NFT marketplaces, adjustments in cryptocurrency enforcement activities, and ongoing legal battles. These changes combined make for a very mixed picture of where the crypto industry is today, and where it may be headed.
Next week, the Official Trump (TRUMP) token will be distributed approximately $320 million of new tokens. This is huge news not just for the digital asset! One such NFT marketplace has formally petitioned U.S. regulators for guidance. They are seeking clarity that platforms like theirs should not be regulated as securities exchanges or brokers, which underlines the still-playing out discussion over how exactly to classify and regulate digital assets.
On Monday, the U.S. Department of Justice (DOJ) took an unexpected step by dissolving its cryptocurrency unit. This action signals that they may be changing course and raising their enforcement priorities. The DOJ recently instructed staff that it would be “narrowing” criminal enforcement actions related to cryptocurrency.
This change continues a trend of deference to the crypto-adjacent companies by the Trump administration. Just last week the SEC made a surprising decision to drop its investigation into Nova Labs. This decision stems from the company’s supposed violations of federal securities laws. Similarly, companies like Coinbase, Gemini, and Uniswap have all prospered under an environment regarded by some as friendlier to the crypto industry.
It’s not just oceans of regulatory red tape soon to be made clearer. U.S. prosecutors have made it official and will not be changing the charges that have been leveled against Terraform Labs founder Do Kwon. That doesn’t mean they won’t aggressively prosecute other types of cases against him.
Former Binance Asia CEO Richard Teng believes that protectionist policies may be what makes cryptocurrencies attractive in the first place. He’s confident these regulatory changes will increase interest in digital assets.
"trade protectionism" could actually “accelerate interest in crypto as a non-sovereign store of value.” - Richard Teng, Binance CEO
Recent reports had suggested that a wallet, potentially linked to the DeFi project backed by Trump and his family, liquidated a substantial amount of Ethereum (ETH). Blockchain data firm Arkham named the wallet as likely belonging to the project, sparking fears of market manipulation.
The decentralized finance (DeFi) project has unequivocally denied accusations that it sold $8 million in Ethereum (ETH) earlier this week. This denial further complicates an already volatile environment. The project’s representatives have strongly refuted the allegations, claims that the transactions reported were connected to their operations.
Even the administration’s regulatory landscape came under fire. Further, supporters of Biden’s regulatory push claimed that these regulations were necessary to prevent rampant tax evasion. Conversely, industry opposition argued that these rules inhibited American innovation and placed unreasonable demands on the IRS.
Uncertainty over economic factors has only added to the upsurge of market volatility. Together, tariffs caused an overall profound shock to the system that caused immediate crashes in stock markets and led to continued turbulence. The crypto market was no exception to the fallout.
An US-based DeFi protocol just reported success in recuperating from a $235 million hack blamed on North Korean hackers. The aftermath of this recovery effort further highlights the continuing challenges and security risks that permeate the cryptocurrency space.
