Published: January 16th, 2025
Soon-to-be US President Donald Trump is expected to sign a crypto-related executive order in the opening days of his second term, and experts say it's likely just the first in a series or orders that could e-shape America’s financial landscape.
Sources quoted by Bloomberg and the Wall Street Journal suggest Trump’s first crypto executive order will create a presidential crypto council composed of 20 industry leaders. The order could also direct the Securities and Exchange Commission (SEC) to get rid of its SAB 121 rule, which the industry says discourages US banks from holding crypto. The House and Senate repealed the rule in a Spring 2024 vote, but President Joe Biden vetoed the move, allowing the rule to remain.
If it happens, that first-day order may only be the beginning. Trump’s transition team released a draft of a sweeping crypto executive order shortly after Trump’s November’s election win, which addressed more nuanced legal and regulatory issues. Sources quoted by WSJ now expect additional orders reflecting the content of that draft in days and weeks following January 20th.
Some of the proposed changes include mandating that the SEC and Commodity Futures Trading Commission (CFTC) set up a joint crypto working group to align rules, processes and definitions related to digital assets. Another possible order could see the SEC get rid of an exchange rule that hinders new decentralized finance (DeFi) projects. Another order, apparently already in draft form, could direct the new US Secretary of State to work with other countries to develop a coherent rules framework for support crypto innovation.
In the days leading up to his November election win, analysts were suggesting that Trump’s economic policy prescriptions were actually more radical than his Democrat rival’s, potentially putting a number of USD-positive trading scenarios into play.
A market analysis from Horizon Currency suggested forex traders with payments due in USD over the next fortnight should look to cover at least half their USD exposure. The firm noted, however, that there could be significant upside for the Greenback if Trump and the Republicans take control of the White House, Senate, and House of Representatives.
‘The most bullish outcome for USD would be a red sweep (strong Republican majority) and the most bearish outcome a ‘blue sweep’ (the Democratic Party takes control),’ wrote Deutsche Bank’s forex strategy unit in an analyst note.
Analysts at Barclays wrote that a Harris win would see the Dollar give back its recent ‘Trump premium’, which could lead to a two per cent drop against GBP and EUR.’
Trump had made steady but modest gains in national polls at that point, although the difference between the two candidates’ polling results were still thought to be within the margin of error.
‘Analysts at Citibank wrote that ‘the roughly 49-50 per cent figure each candidate is attracting means a structural error in polling methodology could lead to either candidate taking all of the swing states with a large number of electoral college votes.’
Betting markets, which have historically been a more accurate predictor of final results, showed a clear lead for Trump. A week before election day, betting site Polymarket predicted a 66.3% chance of a Trump win, vs. 33.7% for Democratic candidate Kamala Harris.
An August report from international payments firm Corpay suggested a Trump win could be good news for US Dollar bulls.
The company's analysts said a second Trump White House would likely have a protectionist bent, which would strengthen the Dollar but conversely act to undermine the administration’s efforts to reduce America’s ballooning trade deficit.
‘We suspect that the prospect of high tariffs will aggravate already low levels of implied volatility in foreign exchange markets,’ Corpay wrote.
America imports more than it exports, a situation aided by a strong Greenback. The result is a foreign trade deficit that’s grew from USD 74.5 billion in April 2024 to USD 75.1 billion the next month.
Republicans have said the USD 1 trillion-a-year trade deficit in goods will be a major focus for an incoming administration. The plan is to expand baseline tariffs on foreign-made products, pass the Trump Reciprocal Trade Act, and fire back at any perceived unfairness in trading practices.
In the past, Trump has suggested raising tariffs by 60 per cent on Chinese imports and 10 per cent on all others. Corpay notes that would bring trade barriers back to levels not seen since the Second World War.
‘From the Corn Laws in 1815 to the Smoot Hawley Act of 1930, US protectionism can have a cooling impact on global growth.’
In the current environment, Corpay warns that raising tariffs could actually extend America’s trade deficit, an effect seen during the first Trump presidency. If the U.S. economy detaches from global markets, domestic inflation could rise.
That would push the Fed to adopt tighter monetary policy and drive USD higher.
In February 2024, analysts at Wells Fargo believed the Greenback would experience depreciation against G10 peers in the second half of the year.
'While strong growth and cautious Fed policy propelled the Dollar in Q1, as the year rolls on we still forecast reduced growth, even if the economy manages to sidestep a full recession’.
At the start of the year, USD weakness was the consensus position. Falling disinflation, a strong Federal Reserve and gravity-defying economic growth had later prompted some economists to check their forecasts again.
By Q2 2024, the Dollar was the best-performing major for the YTD. At the time, dollar outperformance was a limited view in the analyst community. Currency strategists at Barclay’s had been bullish on Dollar prospects for months, and said they still believed USD strength would be a defining feature of 2024.
