November 27, 2024
Today, I read Bloomberg’s “Time to end SEC, says trading titan Don Wilson,” and was disturbed.
https://www.investmentnews.com/alternatives/time-to-end-sec-says-trading-titan-don-wilson/258391
This article raises several critical issues and points for discussion by serious investors and critical thinkers concerned about financial regulatory changes I see as possible, if not likely, under the Trump 2.0 Administration.
- Was Gensler’s SEC Irresponsible? The article suggests that Gary Gensler’s SEC engaged in aggressive enforcement actions against the crypto industry, which some industry participants view as counterproductive. Was this approach a misuse of taxpayer dollars, or was it necessary to protect investors and maintain market integrity? My view is that, despite my voiced concerns, Gensler has been an exceptionally competent SEC Chair since 2021. The problem regulators face, as I have advocated for decades, is the need for an entirely new securities act to replace those of 1933 (newly issued securities) and 1934 (actively traded on secondary markets).
- Will Trump’s SEC Usher in a New Era of Unregistered Dealers? With Gensler’s resignation and the appointment of a more industry-friendly SEC chair, the industry believes the regulatory environment will become more lenient. Will this lead to increased unregistered dealers, less stringent oversight, and more financial fraud? I think so.
- Will Crypto Trading Be Favored Over Traditional Securities Trading? Trump’s personal involvement in crypto, the Trump Administration’s pro-crypto stance, and the potential shift of regulatory oversight from the SEC to the CFTC is widely expected to favor the growth of the crypto market. How will this impact traditional securities trading and the broader financial markets? I believe the prospect of a market crash involving most financial assets weeks before or after the January 20 Inauguration will substantially impact our thinking about all investing and regulation, including the crypto market.
- What Is the Future of the Fed, the SEC, and Major Banks? Trump 2.0 regulatory changes could have significant implications for the Federal Reserve, the SEC, and major banks that rely on the US Dollar. How will these institutions adapt to a financial system where crypto assets play a more prominent role? I believe the major financial story of 2025 will be the fight between the US bank-owned and supported Fed under Chair Powell and the Trump Administration. I foresee enormous chaos on the near horizon.
Possible Financial Regulatory Changes
- Merging the SEC and CFTC: The idea of merging the SEC and CFTC has been discussed for years. I believe it would significantly reduce regulatory uncertainty and enhance market efficiency. The Trump Administration may consider this proposal to create a streamlined regulator for securities and commodities. If so, I foresee infighting chaos among the Trump surrogates in the leading roles. Not much will get done.
- Increased CFTC Authority Over Crypto: The Trump Administration plans to expand the CFTC’s authority to oversee the $3 trillion digital asset market, particularly Bitcoin and Ethereum. If enacted, this shift would materially reduce the SEC’s role in regulating digital assets. It might also create a more favorable environment for crypto innovation, which may or may not be bad.
- Regulatory Clarity for Crypto Assets: One of the main criticisms of Gensler’s SEC was the lack of clear regulatory guidelines for crypto assets. As a former MIT and Harvard teacher, he is a crypto expert, but as the SEC Chair, he has been caught between powerful lobbies on both sides. Trump 2.0 may prioritize establishing a clear and consistent regulatory framework to provide certainty for crypto businesses and investors. If you can believe it, I wish you good luck!
- Potential Deregulation and Market Innovation: The Trump Administration’s focus on fostering innovation and reducing regulatory hurdles could lead to a more relaxed regulatory environment. This may encourage the growth of new financial products and services but also raises concerns about investor protection and market stability. I believe the only investor protection and market stability Trump is concerned about is anything that favors his own interests. I could be wrong.
Implications for Investors
- Investment Opportunities in Crypto: With a more favorable regulatory environment, the crypto market may see increased investment and growth. If you believe in crypto, consider diversifying your portfolio to include digital assets. Just be mindful of the associated risks.
- Market Volatility: Transitioning to a new regulatory framework would create short-term market volatility as we adjust to the substantial changes. However, the overriding factor will be the market crash I foresee. Regardless, investors must be prepared for volatile fluctuations in asset prices in the near future.
- Impact on Traditional Financial Institutions: If Trump 2.0 successfully implements its platform, the major banks and financial institutions must adapt to the growing prominence of crypto assets. This could involve developing new products and services, which, as the world’s foremost financial engineers, they ought to be successful.
- Long-Term Regulatory Stability: While the immediate changes are likely to create uncertainty, establishing a clear and consistent regulatory framework would provide long-term stability for the financial markets.
In conclusion, potential financial regulatory changes under the Trump Administration present investors with some opportunities but mostly challenges. Investors should monitor these developments closely and adjust their strategies accordingly. The best way to make informed decisions is to ask critical questions.
That won’t be easy because the US financial system under Trump 2.0 will fail in 2025.
“Books will be written!”