Washington’s crypto embrace will boost institutional interest, sources say

The Trump administration's embrace of cryptocurrency — which includes an executive order and a new SEC crypto task force — indicates a positive step forward in the industry that’s sure to spur renewed interest among institutional investors, sources said.

Basically “the day after the election,” Ron Hammond, senior director of government relations and institutional engagement at the Blockchain Association, said he started getting calls from institutional investors, mostly banks, that were ready to jump into crypto, mostly when it comes to bitcoin.

“A lot of industry folks who are not usually in my orbit have been reaching out saying, ‘we’re going to get involved,’” Hammond added.

During his campaign, President Donald Trump said he would focus on changing the way federal regulators handle crypto, stating in a September X Spaces livestream that the Biden administration has “been very hostile toward crypto.”

The SEC under former Chair Gary Gensler often received criticism for its crypto approach, with many calling it a “regulation by enforcement approach,” since the agency filed enforcement actions against a host of major crypto firms.

“It has been impossible over the last few years to move forward with confidence” in the industry, given the SEC has been “very, very aggressive in terms of enforcement,” according to Tonya Evans, professor at Penn State Dickinson Law and author of the crypto-focused book, Digital Money Demystified.

Evans said the Trump administration’s embrace of crypto will “absolutely” lead more institutional investors into crypto, though she pointed out that institutions like BlackRock had already entered the industry via spot bitcoin ETFs back in January 2024.

Crypto fund inflows

James Seyffart, an ETF Research Analyst at Bloomberg Intelligence, said that crypto ETFs have done “exceptionally well” since the election.

Ethereum ETFs shifted from $600 million in outflows, on a net basis, from their launch in July to more than $3 billion in net inflows “just since Trump’s election,” Seyffart said.

And bitcoin ETFs now have $115 billion in assets “in the U.S. alone, after peaking around $123 billion, so they're knocking on the door of taking out the amount of assets in gold ETFs in the U.S,” which currently have about $134 billion in assets, he added.

Across the country, several states are now considering legislation that would allow their state treasurer to invest public funds in crypto. A bill authorizing state investments in certain digital assets passed the Utah House of Representatives Feb. 6, though the legislation exempts funds of the Utah State Retirement Board, among other funds. Another bill introduced in Ohio, named the "Ohio Bitcoin Reserve Act," would authorize state fund investments in bitcoin and require state entities to accept payment in crypto.

Ohio State Sen. Sandra O'Brien, the Republican who introduced the bill, wrote in a post on X, "Crypto will be a major part of President Trump’s term. When his working group issues recommendations, Ohio will be ready."

Before taking office, Trump named venture capitalist David Sacks to serve as his artificial intelligence and crypto czar, a new position in the White House.

The president then signed an executive order Jan. 23 establishing a working group on digital assets, tasked with putting forth legislative and regulatory proposals on the issue, and led by Sacks.

In a Feb. 4 news conference at the Capitol, Sacks said he’s looking forward to “creating a golden age in digital assets.”

“I've talked to many founders over the past few years, and they've told me repeatedly that the number one thing they need from Washington is regulatory clarity,” Sacks said at the news conference. “They just want to know what the rules of the road are so they can abide by them.”

The news conference also featured Republican leaders of the Senate Banking Committee, House Financial Services Committee, Senate Agriculture Committee and House Agriculture Committee. The committee leaders formed a bicameral working group to “make progress on that clarity for a regulatory framework and to create and structure a stablecoins bill that will lend itself to advancing America as the reserve currency,” said House Financial Services Chair French Hill, R-Ark.

In May, the House passed a bill that would give the Commodity Futures Trading Commission new authority over the digital commodities market while maintaining the SEC’s authority over the digital securities market. That bill didn’t make it through the Senate before the end of the year, meaning it would need to be reintroduced this Congress.

Hill said that bill “had the basics” for what the lawmakers will introduce this year, though “there may be some modest changes,” noting that the legislation passed the House with bipartisan support.

Lawmakers are also looking to pass a bill aimed at regulating stablecoins, as last year’s version didn’t make it through Congress either. Senate Banking Committee Chair Tim Scott, R-S.C., said at the Feb. 4 news conference that his goal is to be “as aggressive as possible to achieve an objective of having bills through the Senate in 100 days.”

“I'm excited about the synergistic approach that we're taking in the House and the Senate, with the White House leading the way,” Scott added.

With new leadership at the SEC, the securities regulator has also been making changes in the crypto space.

On Jan. 21, Acting Chair Mark Uyeda announced the launch of a new SEC crypto task force aimed at “developing a comprehensive and clear regulatory framework” for digital assets, which Republican Commissioner Hester Peirce will lead.

Trump’s pick for SEC chair, Paul Atkins, is also expected to take a more friendly approach to crypto, which is a sigh of relief for the industry, according to the Blockchain Association’s Hammond.

“The enforcement campaign from the Biden era (and) the Gensler regime at the SEC is largely over,” Hammond said.

For the top crypto companies in the U.S., “nearly every single one of them has had legal issues with the SEC,” so new leadership and a new crypto approach at the agency is like “weight being lifted off," he added.

On Jan. 23, the SEC also rescinded guidance that made it more difficult for banks to custody digital assets. That guidance, known as Staff Accounting Bulletin No. 121 or SAB 121, required any custodian of digital assets to report those assets on their balance sheets, thereby raising capital requirements.

The SEC under Uyeda issued SAB 122, which repeals SAB 121.

The move is “a positive step forward that signals to banks that it is okay to a custody crypto,” according to Penn State Dickinson Law’s Evans.

While the Trump administration has already taken several steps forward for the crypto industry, sources agreed that the journey’s not over.

Trump’s executive order creates a crypto working group that’s required to submit a report to the president recommending regulatory and legislative proposals for digital assets, as well as propose a “regulatory framework governing the issuance and operation of digital assets, including stablecoins in the United States,” among other things.

However, Evans contended that former President Joe Biden’s executive order on crypto from 2022 had similar themes. That order directed the Treasury Department and other regulators to assess and develop policy recommendations on how the sector could impact financial markets. It also encouraged the Financial Stability Oversight Council to identify and mitigate systemic financial risks posed by digital assets and develop policy recommendations to address any regulatory gaps.

Trump’s executive order "echoes the talking points" about crypto, but "I don't see the teeth," Evans said, “so time will tell what manifests from that.”

Hammond noted that “there’s a lot of work still to be done” in Washington, referencing both bills that Congress is looking to pass.

And while recent developments will likely result in a new wave of institutional interest in crypto, “if an institution has concerns about Trump, anything that Trump is for they will question,” Evans said.

Trump and his wife, Melania Trump, have both launched their own crypto tokens, which Evans called “problematic.”

Several crypto enthusiasts are critical of the president and first lady’s tokens, which are often labeled as “meme coins,” as they feel the coins undermine the credibility of the industry, according to the Wall Street Journal.

Evans said she thinks “the biggest risk” to the crypto industry “isn’t just price volatility, but it’s even the hint of impropriety” or “the hint of political grifting.”

“If we don’t get this right, I think that the next bull run that can be sustained, it’s going to be built on hype and not legitimacy, and I think that would do more damage to the industry than the past four years have done,” Evans added.