The 2024 US presidential election has ushered in a new wave of optimism for the cryptocurrency industry, with Donald Trump’s victory signaling a potentially favorable stance on digital assets. However, non-profit advocacy group Coin Center has warned that entrenched regulatory policies could still deter crypto investors and developers, threatening innovation in the United States.
In a blog post on November 21, Coin Center’s Research Director Peter Van Valkenburgh outlined three significant threats to crypto users and developers in the US as the new administration prepares to take office in 2025.
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Grave Threats to Crypto Under Existing Policies
While Trump’s return to the presidency has been perceived as a net positive for the crypto sector, Coin Center highlighted three persistent “surveillance issues” that could undermine progress:
- Tax Reporting Requirements
Section 6050I of the US tax code mandates that individuals receiving $10,000 or more in cryptocurrency report the transaction to the Internal Revenue Service (IRS). Coin Center has labeled this requirement as unconstitutional, arguing that it infringes on privacy and discourages legitimate use of digital currencies. - Sanctions on Tornado Cash
Tornado Cash, a decentralized crypto mixer, has faced sanctions and criminal charges for allegedly facilitating unlicensed money transmission. Coin Center warns that the legal actions against Tornado Cash and its founder, Roman Storm, could set a dangerous precedent, penalizing developers of non-custodial services and stifling innovation in the blockchain space. - Anti-Money Laundering (AML) Policies
Overly stringent AML regulations remain a significant concern. Coin Center argues that these measures, which aim to prevent financial crimes, do little to deter criminals but disproportionately burden law-abiding users and developers.
Trump’s Pro-Crypto Stance: A Mixed Blessing
President Trump’s administration is widely expected to favor blockchain technology and digital assets, potentially appointing crypto-friendly regulators to key positions in the Securities and Exchange Commission (SEC) and the Treasury Department.
Van Valkenburgh noted that some controversial policies initiated under the outgoing administration could be frozen or abandoned, creating a more accommodating environment for crypto projects.
However, there is skepticism about whether the new administration will roll back sanctions or amend AML policies. The Department of Justice (DOJ), which prides itself on political independence, may continue pursuing ongoing cases against crypto entities like Tornado Cash, regardless of changes at the executive level.
Crypto Reporting Requirements Under Scrutiny
The $10,000 reporting mandate under Section 6050I has been a contentious issue. Critics argue that warrantless reporting to the IRS infringes on users’ privacy and could discourage adoption. Coin Center has challenged the constitutionality of this provision, stating that it undermines the decentralized and private ethos of blockchain technology.
“Overly broad reporting requirements risk alienating users and hindering the growth of legitimate crypto use cases,” said Van Valkenburgh.
Advocates hope that the Trump administration will address these concerns, fostering a regulatory environment that balances transparency with user privacy.
Sanctions and Their Ripple Effects
The sanctions on Tornado Cash have sparked intense debate in the crypto community. The platform, designed to enhance privacy by mixing cryptocurrency transactions, has been accused of facilitating money laundering. Roman Storm, the platform’s founder, faces criminal charges for unlicensed money transmission.
Coin Center warned that such actions could create a chilling effect on developers of decentralized tools. “If sanctions against Tornado Cash are upheld, it could discourage innovation and drive talented developers to jurisdictions with more favorable policies,” said Van Valkenburgh.
AML Policies: A Double-Edged Sword
Anti-Money Laundering policies are another area of concern. While these regulations are intended to curb illicit activities, Coin Center argues that they have been applied in ways that disproportionately target legitimate users and services.
“AML policies need to strike a balance,” Van Valkenburgh stated. “Excessive surveillance not only undermines user privacy but also risks pushing innovation offshore.”
Impact on Developers and Innovation
The uncertainty surrounding US crypto regulations has already caused some developers to seek opportunities abroad. Countries with clearer and more supportive frameworks, such as Switzerland and Singapore, have become attractive alternatives for blockchain innovators.
Coin Center emphasized the need for a collaborative approach, urging policymakers to engage with industry stakeholders to craft regulations that foster innovation while addressing legitimate concerns about security and compliance.
Call to Action for the Crypto Industry
As the Trump administration prepares to take office, Coin Center has called on the crypto industry to engage proactively with policymakers. Van Valkenburgh urged stakeholders to initiate conversations with the new administration early, emphasizing the importance of shaping policies that support growth and innovation.
“Don’t wait. Start knocking on doors from day one,” he advised. “It’s critical to ensure that the regulatory landscape is conducive to the continued development of this transformative technology.”
Balancing Regulation and Innovation
The debate over crypto regulations highlights the broader challenge of balancing oversight with innovation. While effective regulations are necessary to prevent abuse, overly restrictive policies could stifle progress and push the industry to relocate.
Coin Center’s warnings serve as a reminder that the future of crypto in the US depends on thoughtful, well-crafted policies that address risks without undermining the core principles of decentralization and privacy.
As the industry awaits the new administration’s approach, the stakes for the US crypto sector—and its global competitiveness—could not be higher.
