Digital Assets: What to Expect from the Incoming Administration and Congress

In this insightful article, the authors discuss the anticipated shift toward a more favorable governmental stance on crypto assets under the Trump Administration and the newly Republican-led Congress. Key nominees for senior administration positions, such as Paul Atkins, who is poised to become Chairman of the Securities & Exchange Commission (SEC), are known for their crypto-friendly perspectives. Meanwhile, Congress is also aligning with this approach, with a crypto advocate expected to chair the House Financial Services Committee and House Majority Leader Steve Scalise reportedly planning to prioritize crypto-related legislation within the first 100 days of the new Congress.

So, what does all this mean? Zarb, Neuburger & Choy analyze the potential impact by examining the SEC and Congress.

The SEC

The SEC has some flexibility to facilitate the public offering and trading of digital assets, especially if it implements rules specifically designed for such assets. For instance, the SEC could introduce tailored registration requirements for token offerings or create bespoke regulations for trading markets dealing with digital assets.

Traditionally, the SEC has applied its “Howey” test—an investment company analysis—to determine whether digital assets qualify as securities subject to regulation. This is consistent with how the SEC has treated other non-traditional assets, such as condominiums and interests in fruit orchards. The Supreme Court has repeatedly upheld the SEC’s approach, limiting the agency’s ability to deviate from this framework in the absence of new legislation.

Does this Supreme Court precedent restrict the SEC’s ability to ease regulations governing digital assets? Not entirely. The SEC still has room to adopt new rules and interpretations that facilitate digital offerings and trading but must do so within the confines of the existing Securities Act and Exchange Act. For example, new rules could refine current registration and exemption requirements for token offerings and related markets. However, legislative changes would be required to enable more fundamental reforms…

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