The cryptocurrency market has surged recently, driven by a wave of optimism following President-elect Donald Trump’s announcement of Paul Atkins as his pick for the Securities and Exchange Commission (SEC) chair. As bitcoin surpasses the $100,000 mark, industry stakeholders are watching closely to see how Atkins, a seasoned regulator with ties to the Bush administration, will shape the future of crypto regulation in the U.S.
Atkins’ appointment has prompted cautious optimism among venture capitalists (VCs) in the crypto space, many of whom have been critical of current SEC chair Gary Gensler’s approach, which they describe as “regulation by enforcement.” Gensler’s aggressive probes, particularly the ongoing litigation involving Coinbase and allegations of unregistered securities dealings, have led some crypto startups to consider relocating abroad. However, with Atkins’ potential leadership, there is hope that regulatory clarity will return, helping to reverse this trend.
Alex Marinier, founder and general partner at New Form Capital, expressed optimism about Atkins’ appointment, citing his previous work with the Token Alliance, a trade group focused on the crypto sector. Marinier believes Atkins understands the industry’s needs and could bring a more balanced approach to crypto regulation. Still, the nomination requires Senate confirmation, and Atkins has already faced some opposition from Democrats.
Marinier emphasized that many top-tier crypto teams have left the U.S. due to the uncertainty surrounding regulations post-FTX, but he is hopeful that the tide will change. As regulatory frameworks become clearer, Marinier expects to see more teams returning to the U.S. to set up operations. Despite this optimism, he acknowledged that lingering concerns from past regulatory actions will take time to fade.
Infrastructure Startups Poised to Benefit
Bitcoin has surged by 130% this year, with ether not far behind, climbing by 65%. This growth, coupled with rising trading volumes, has provided a boost to infrastructure startups that facilitate crypto trading and custody. According to PitchBook’s Q3 2024 Crypto Report, these businesses—such as those profiting from bid-ask spreads and crypto storage fees—are likely to continue benefiting from the market’s upward trajectory.
Hoolie Tejwani, head of Coinbase Ventures, noted that a “path to meaningful progress” on regulatory clarity in the U.S. could fuel increased startup activity and VC funding in 2025. Tejwani sees particular promise in sectors like stablecoin payments, Web3 gaming, decentralized finance (DeFi), and the intersection of crypto with artificial intelligence (AI).
Uncertainty Over Crypto’s Regulatory Classification
A key factor in determining the trajectory of the market will be Atkins’ interpretation of U.S. securities laws, specifically regarding which tokens are classified as securities and which may fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC) as commodities. VCs like Marinier are closely watching this regulatory grey area, as it has significant implications for the types of crypto assets that can be legally traded and their associated compliance requirements.
Atkins’ previous experience as an SEC commissioner from 2002 to 2008, along with his critical stance on some of Gensler’s more aggressive initiatives, has positioned him as a potential advocate for a more industry-friendly approach. Steve Brotman, managing partner at Alpha Partners, highlighted that Atkins’ past critiques suggest he may pursue policies that foster growth in both traditional financial markets and emerging sectors like crypto.
Challenges Ahead for U.S. IPO Market
Atkins’ regulatory agenda will also need to address the broader challenges facing the U.S. IPO market. With the Federal Reserve lowering interest rates, the U.S. public offering market has seen a marked decline in recent years. As SEC chair, Atkins will have to balance his support for a thriving IPO market with the growing demand for clearer regulatory guidelines in the crypto space.
Brotman pointed out that Atkins has previously been critical of some SEC initiatives that have been viewed as overly aggressive toward both Wall Street and the crypto sector. This stance suggests that, if confirmed, Atkins may take a more measured approach, focusing on fostering innovation without stifling the industry’s growth.
The Road Ahead
As Paul Atkins’ nomination proceeds through the Senate, the crypto industry will remain focused on how he shapes the regulatory environment. With the market seeing significant growth, particularly in infrastructure and innovative financial products, the need for clear, consistent regulations has never been greater. If Atkins delivers on his promises, U.S. crypto startups may find themselves in a more favorable climate for expansion, potentially reversing the trend of companies moving abroad.
For now, industry leaders like Marinier and Tejwani remain cautiously optimistic, but the clarity they seek will only come once Atkins begins to define his vision for the future of crypto regulation in the U.S.
References:
- PitchBook Q3 2024 Crypto Report
- New Form Capital
- Coinbase Ventures Insights
- SEC Nomination and Senate Confirmation Process
