Crypto lawyer’s open letter to Trump: Make America the crypto capital of the world

Source: CoinDesk; Compiled by: Baishui, Golden Finance

Preface

More than 20 lawyers working in the cryptocurrency industry have written an open letter outlining how the incoming Trump administration will create a legal environment conducive to the development of cryptocurrencies. The letter, published exclusively by CoinDesk, covers SEC and CFTC regulation, potential legislation governing stablecoins and DeFi, as well as tax cuts and streamlined procedures.

The following is the original text of the letter:

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Dear President-elect Trump:

Last year, you delivered a keynote speech at the Bitcoin Conference in Nashville, promising to make the United States the cryptocurrency capital of the world if re-elected. As you return to the Oval Office this Monday, we write to you as practicing members of the Cryptocurrency Bar Association to recommend regulatory policies that will help you achieve this goal.

The United States, like cryptocurrencies, is founded on individual freedom and is naturally in a position to lead the world in its development. Unfortunately, U.S. regulators have so far refused to apply existing laws to digital assets and the blockchains behind them (or even refused to explain why), creating an unfavorable business environment that has forced many entrepreneurs and developers to head overseas.

To unleash American creativity and compensate for the neglect of the blockchain industry, we recommend that you pursue the following forward- looking policies in three areas: supporting American companies; promoting crypto values ​​such as privacy, disintermediation, and decentralization; and domestically Create a good business environment.

Support American businesses

The cryptocurrency industry has produced a range of mature and emerging use cases, including digital gold, stablecoins, permissionless payments, decentralized finance, real-world assets, decentralized physical infrastructure (DePIN), and more. Many of these use cases are being responsibly advanced in the United States by businesses such as Coinbase, Circle, and Consensys, as well as developers who contribute to the cryptocurrency’s open-source decentralized infrastructure. To continue to compete with international competitors, these parties need clear rules and appropriate regulatory guidance.

General rules

Token issuance and secondary market sales are at the heart of the crypto- economy and are subject to confusing and overlapping regulatory authorities of the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). Market structure legislation should clearly delineate the jurisdiction of the main regulator and set out when assets enter and exit that jurisdiction.

In this regard, Congress should avoid making the scope of U.S. securities laws too broad, as the SEC has done. Tokens powered by open source software and consensus mechanisms, which otherwise have minimal dependence on centralized actors, are not securities because no legal relationship exists between the token owner and the “issuer” as defined by securities laws. Likewise, crypto- assets such as art NFTs (which are simply digital artworks) and non-investment activities such as staking and lending Bitcoin are outside the scope of securities laws.

Congress should be bolder. That means not getting hung up on previous legislative efforts like FIT21, which were shaped by earlier political circumstances and had unintended consequences. It also means leveraging the regulatory experiences of other countries, such as the EU’s MiCA framework, while avoiding their pitfalls to chart a unique and fearless path forward for the United States.

Specific industries

In addition to advocating for general rules, your administration should urge Congress and relevant agencies to address specific areas because of their strategic importance to the crypto industry and the country.

Stablecoin. Stablecoins currently have a market capitalization of over $200 billion and are the lifeblood of the digital asset ecosystem. Their growing recognition within frameworks such as Stablecoin Standards and national regulators requires comprehensive legislation for their issuance and management, ensuring they are transparently supported and do not threaten financial stability. In addition to benefiting consumers, regulatory support for stablecoins furthers national interests. Similar to Eurodollars, stablecoins, typically denominated in U.S. dollars, reinforce the U.S. dollar’s ​​status as the global reserve currency and increase demand for U.S. Treasury securities held by issuers.

TradFi integration. The unprecedented success of Bitcoin and Ethereum ETFs shows that cryptocurrencies are beginning to merge with traditional finance. Regulatory policies should ensure safe and orderly integration so that consumers have access to trusted hosting services. This requires amending or repealing biased SEC accounting standards (such as SAB 121) and custody rules. But it shouldn’t stop there. Policies to support innovation in this area should also promote the tokenization of securities representing traditional financial assets such as stocks, bonds or real estate into blockchain-based tokens. Resulting benefits include improved liquidity, fractional ownership and faster settlements, which will strengthen U.S. capital markets and ensure they remain the most developed and innovative in the world.

DeFi. Decentralized finance has the potential to modernize the global financial system and bring value to ordinary Americans by eliminating costly financial intermediaries. You shouldn’t let vested interests and alarmism prevent the United States from becoming the world leader in DeFi. In this regard, regulation for centralized actors such as exchanges and issuers must be crafted in a way that avoids inadvertently capturing and paralyzing the still-nascent DeFi ecosystem.

Promoting innovation through a commitment to crypto value

If cryptocurrency innovation is to be promoted, regulatory policies must respect the values ​​of cryptocurrencies, including privacy, disintermediation, and decentralization. This commitment resulted in two key regulatory principles. First, regulation should not place a greater burden on cryptocurrencies where traditional analogues exist. Second, regulation should evolve in the absence of traditional analogues.

When to treat cryptocurrencies on an equal footing with traditional

assets and instruments

The first principle affects products such as self-hosted wallets, which enable users to hold and manage their own private keys. Since these tools are similar to physical wallets used for personal asset management, they should not be viewed as anything different – ​​that is, as financial intermediaries for regulatory oversight and monitoring purposes. You don’t need to complete KYC to deposit cash into a physical wallet; the same goes for storing coins in a digital wallet.

Similar logic applies to taxing block rewards. Americans who mine or verify blockchain transactions are creating new property, just like farmers growing crops in their fields. However, the IRS currently taxes their income. This differential treatment should be abolished.

When Should Cryptocurrencies Be Treated Differently?

The second principle requires regulators to resist placing cryptocurrency participants and activities within legacy frameworks that are incompatible with cryptocurrencies. Doing so would undermine the cryptocurrency ecosystem, push the industry offshore, and erode the rule of law.

Unfortunately, this is the path many U.S. regulators have chosen.

The IRS has begun treating cryptocurrency front-ends as “brokers” without legal authority. The Justice Department has begun charging non-custodial wallet developers with violations of unauthorized fund transfer regulations, despite its long-standing policy to the contrary. The U.S. Treasury Department has approved privacy mixer Tornado Cash’s smart contract, even though it is neither foreign nor property, but just code. (An appeals court overturned that sanction.)

Without diminishing the importance of government interests (tax evasion, money laundering, and national security), we believe that the government's approach in each case was wrong in terms of innovative policy, and we encourage your government to reverse these practices.

We urge regulators not to regulate digital assets and blockchain businesses the same way they regulate traditional companies, but to work with this new technology model and our industry. For example, if government surveillance (KYC) in a decentralized environment is actually justified in certain circumstances, regulators could leverage blockchain-based credentials that are portable across protocols to give users control over their data ( Web3 architecture) and align with a frictionless blockchain ecosystem. Likewise, they can integrate programmability of tokens and smart contracts to exclude sanctioned parties from the crypto-economy.

Attract top talent through a good business environment

To become the top destination for top crypto talent, the United States must create a business-friendly environment. Your government can start this process on day one.

End the debanking of crypto companies. Your government should direct the Federal Deposit Insurance Corporation (FDIC) and all other agencies involved in Operation Chokepoint 2.0 to immediately cease irresponsible activities aimed at debanking the crypto industry.

Improving SEC rulemaking and enforcement. You should instruct your SEC chairman to overhaul the agency's approach to crypto. Over the past four years, the SEC has consistently exceeded its authority by holding integrity industry leaders like Coinbase and Consensys accountable, regulating individual developers and users (in its exchange redefinition rulemaking), and taking enforcement actions against wallet providers . It is time for the SEC to correct this harmful practice and begin constructive engagement with the crypto industry while focusing its efforts on preventing fraud rather than suppressing financial speculation, which is beneficial to innovation.

Eliminate punitive tax rules. Your government should eliminate punitive tax rules that push entrepreneurs and developers overseas while leaving well- intentioned taxpayers unsure of how to calculate their tax bills. Low-hanging fruit improvements include current fees for adopting software development; tax deferrals for verification rewards and airdrops; safe harbors for minimum spend transactions (e.g., less than $5,000); mark-to-market options for cryptocurrency investors and the abolition of treating websites as brokers IRS reporting requirements for persons. Congress should also repeal amendments to Section 6050I that impose onerous (and potentially unconstitutional) reporting requirements on cryptocurrency transactions over $10,000.

Cut unnecessary red tape. Consistent with the mission of the Department of Government Effectiveness (DOGE), we urge your office to work with Congress and government agencies to reduce unnecessary red tape that restricts cryptocurrency and fintech. This includes simplifying or eliminating registration and reporting requirements for digital asset offerings that meet certain conditions, including providing required investor disclosures. Congress should also consider legislation that would create a unified federal money transmission licensing framework to bring clarity and efficiency to the broader fintech ecosystem.

In pursuing the forward-looking policies described above, we encourage your government to consult with industry leaders and remain sensitive to the transnational scope of the digital asset ecosystem. (We view your establishment of the Cryptocurrency Council as a positive step in this direction.) We also recommend utilizing devices such as regulatory sandboxes to limit the risk of unintended regulatory consequences.

Now is a good time for the United States to start establishing its global regulatory leadership. By ensuring this is done, your administration will contribute to the country's future economic prosperity and support a technology that is grounded in America's deep-rooted values ​​and freedoms. You should seize the moment.

Sincerely,

Ivo Entchev,Olta Andoni,Stephen Rutenberg,Donna Redel

The letter was also signed by the following members of the Crypto Lawyers Association: Mike Bacina, Joe Carlasare, Eli Cohen, Mike Frisch, Jason Gottlieb, Eric Hess, Katherine Kirkpatrick, Dan McAvoy, John McCarthy, Margaret Rosenfeld, Gabriel Shapiro, Ben Snipes, Noah Spaulding, Andrea Tinianow, Jenny Vatrenko, Collin Woodward and Rafael Yakobi.