Political risk for the crypto industry is rising, TD Cowen has warned, as actions tied to U.S. President Donald Trump and his administration could derail progress on crypto regulation.
"Our concern is that political threats could intensify to the point where they become a threat to legislative and regulatory reforms for crypto," TD Cowen's Washington Research Group, led by Jaret Seiberg, wrote in a note on Monday. "We do not yet see political risk as derailing crypto's Washington agenda, but the risk is rising rather than falling. It is why we see this as a key factor for crypto investors."
Washington lawmakers and regulators are currently making progress on crypto legislation and crypto guidance. The U.S. Securities and Exchange Commission (SEC) has dropped several crypto lawsuits and lawmakers are floating ideas for regulatory frameworks for stablecoins and market structure. Last week, Acting SEC Chair Mark Uyeda also suggested the agency may offer exemptive relief for crypto trading platforms and traditional exchanges that want to trade tokenized securities, Seiberg said.
However, Seiberg said that momentum could be threatened by growing controversy around the Trump family's crypto involvement, including a planned stablecoin launch. "We increasingly worry about escalating political risk as actions by the Trump family business and his administration could spark a backlash that derails positive government action," he wrote.
Seiberg also flagged concerns over the Trump administration's shifting anti-money laundering policies, such as lifting sanctions on crypto mixer Tornado Cash and the Department of Justice scaling back prosecutions related to crypto money laundering.
He further pointed to a Wall Street Journal report last week that said executives from crypto exchange Binance met with Treasury Department officials and discussed loosening U.S. government oversight while exploring a business deal with World Liberty Financial, a Trump family-linked crypto venture. The report also said that Justin Sun, founder of the Tron blockchain network, is the largest outside investor in World Liberty and acts as an adviser. The report cited blockchain analytics firm TRM Labs in noting that over half of all illicit crypto activity last year — roughly $26 billion — occurred on Tron.
Overall, while Seiberg believes crypto reforms are still on track, he warned that political risk is "rising rather than falling" — and could eventually derail the push for clearer crypto rules in the U.S.
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