In recent days, a notable shift in sentiment has swept through Wall Street, with many executives expressing newfound optimism about the cryptocurrency industry as President Donald Trump steps into his second administration. This change is largely due to the 47th President’s supportive stance on cryptocurrencies, a notable departure from his previous skepticism during his first term.
Morgan Stanley’s Push Towards Crypto
During the World Economic Forum held in Davos, Switzerland, Ted Pick, the CEO of Morgan Stanley, expressed an eagerness for the bank to deepen its involvement in cryptocurrency transactions. He shared, "For us, the focus is on whether we can act as transactors given our standing as a heavily-regulated financial institution."
Traditionally, banks have approached the crypto space with caution, wary of the ambiguity surrounding regulations. Since 2013, the Securities and Exchange Commission (SEC) has undertaken more than 200 enforcement actions related to crypto, causing a hesitance that slowed down institutional participation.
Now, with President Trump’s administration hinting at a more favorable regulatory environment for digital currencies, many executives are rethinking their strategies.
Trump has nominated several pro-crypto individuals to prominent positions in his administration. Key figures include Paul Atkins for SEC chair, Howard Lutnick for Secretary of Commerce, and Scott Bessent, a hedge fund manager, for the Treasury. Should Bessent be confirmed, he will lead crucial departments that shape tax and compliance policies surrounding digital assets, potentially smoothing the path for their wider acceptance.
Morgan Stanley has already charted some territory in the crypto landscape. The bank was the first major US financial institution to offer its affluent clients access to Bitcoin funds back in 2021. Furthermore, it’s opened doors for its financial advisors to promote the newly introduced Bitcoin exchange-traded funds (ETFs).
Pick highlighted the growing legitimacy of Bitcoin as it gains traction in mainstream finance, noting, "The longer it trades, perception becomes reality."
SEC’s Policy Shift Could Aid Banks
Obstacles remain despite the budding optimism. A pivotal accounting rule set by the SEC in 2022 directs banks to classify cryptocurrencies as liabilities on their balance sheets, imposing stringent capital requirements that discourage banks from providing crypto custody services.
Efforts to discard this rule, known as SAB 121, saw bipartisan backing in Congress but faced a veto from then-President Joe Biden, maintaining a challenging regulatory backdrop for banks.
Goldman Sachs CEO David Solomon acknowledged these challenges, stating, "From a regulatory standpoint, owning Bitcoin isn’t an option for us at the moment." However, he expressed openness to re-evaluating the stance if the regulatory framework changes.
In a crucial move, the SEC recently withdrew SAB 121, a decision that could ease some burdens on banks eyeing opportunities in digital assets.
SEC Commissioner Hester Peirce, selected to head a newly created "crypto task force," welcomed this development, signaling a potential shift towards a more crypto-friendly regulatory atmosphere.
The 1D chart illustrates the total crypto market cap valuation at $3.5 trillion. Source: TOTAL on TradingView.com
Featured image sourced from DALL-E, with chart provided by TradingView.com
