Rhetoric meets reality: What Trump 2.0 means for financial regulation
Trump’s first steps
During his first month in office, President Donald Trump signed 70 executive orders, 12 proclamations, and 17 memoranda. From border security measures to federal workforce reforms, his administration has pursued a broad and ambitious agenda, with multiple high-profile initiatives competing for attention.
Trump’s approach to public policy is defined by deregulation, especially in rhetoric. In his first term, he introduced the Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs in 2016, which established a “two-for-one” rule - requiring the removal of two existing regulations for every new one introduced. Now, in his latest term, the commitment to deregulation appears even more aggressive.
Key executive orders related to regulation
Unleashing Prosperity Through Deregulation
- Trump’s latest executive order raises the bar, building on his previous policy of removing two regulations for every new one, he is now calling for the elimination of ten regulations for each new one introduced.
Ensuring Accountability For All Agencies
- This executive order mandates that all federal agencies, including independent ones, submit draft regulations for White House review before they can be published in the Federal Register. The goal is to align all executive branch actions with presidential priorities and increase government accountability.
Strengthening American Leadership in Digital Financial Technology
- This order aims to provide regulatory clarity and certainty in financial technology by promoting technology-neutral regulations, transparent decision-making, and well-defined jurisdictional boundaries. It seeks to support innovation in digital assets, permissionless blockchains, and distributed ledger technologies while fostering a more inclusive digital economy.
Trump’s rationale for deregulation
Trump’s rhetoric on deregulation remains consistent with his first term, emphasising economic growth, individual freedom, and reduced bureaucracy. His administration argues that overregulation stifles business, raises costs, and limits consumer choice.
“President Trump will halt the job-killing and inflation-driving regulatory blitz of the Biden administration.”
“Overregulation stops American entrepreneurship, crushes small businesses, reduces consumer choice, discourages innovation, and infringes on the liberties of American citizens. It also contributes to the high cost of living, including by driving up energy prices.”
Deregulation has also garnered support from parts of the financial sector. Goldman Sachs CEO David Solomon expressed optimism about engaging in constructive discussions to enhance transparency and consistency in capital regulations, signaling that banks will actively lobby for changes under Trump’s leadership.
Feasibility
Removing regulations is more difficult than halting new ones. Most deregulatory actions must undergo the notice-and-comment process and potential judicial review. Trump’s previous deregulation efforts faced legal challenges, with many being overturned or delayed. However, he did demonstrate that regulatory costs can be reduced - his first term lowered regulatory costs by an estimated $11,000 per household.
The Congressional Review Act (CRA) permits only the repeal of very recent regulations, limiting rapid, large-scale deregulation. While he used it effectively in his first term to repeal 16 Obama-era rules, most deregulation must go through the lengthy Administrative Procedure Act (APA) process, requiring public notice, comment periods, and legal justification - often leading to court challenges and delays.
A more realistic scenario is targeted deregulation in key areas; Major Wall Street banks see the Trump administration as an opportunity to limit proposed changes to capital regulations established after the 2007-2009 financial crisis. Their objectives include modifying or cancelling the Basel Endgame capital requirements, reducing the capital surcharge for global banks, adjusting leverage constraints, and overhauling the Federal Reserve’s annual stress tests.
Surveillance and recordkeeping obligations do not appear to be primary targets for deregulation, as they have little direct connection to inflation and are critical for financial oversight and market integrity. However, given the administration’s broad anti-regulation stance, secondary rule changes could still emerge if industry lobbying intensifies.
A word on Cryptocurrencies
When Trump took office, the crypto community watched closely, fueled by speculation about a potential Bitcoin reserve. But the inauguration speech came and went - without a single mention of digital assets. While crypto is central to its investors, it remains a lower priority on the national stage, where issues like war, border security, and inflation take precedence.
The rumors about a Bitcoin reserve were largely overblown. During his campaign, Trump’s actual stance was more measured - he pledged not to sell Bitcoin acquired through criminal seizures, but that’s a far cry from actively accumulating it as part of a national strategy. It was, in fact, Cynthia Lummis who first proposed the “Bitcoin Act” in July, 2024, encouraging the Department of the Treasury to purchase one million Bitcoins over a five-year period and hold the Bitcoins in trust for the United States. All Bitcoins acquired under this bill would be held for at least 20 years unless used to retire outstanding federal debt. Her recent appointment to Chair of the Senate Panel on Digital Assets demonstrates Trump’s support of the Act and, for many, signals increased likelihood that such a Bill will be passed.
While federal clarity remains elusive, crypto adoption is progressing at the state level.
At the time of writing, 20 states have pending approvals for Bitcoin reserves, with two already greenlit. Despite federal hesitations, proactive state-level actions reflect a clear intention to stay ahead of the inevitable nation-state adoption that appears poised to begin.
More recently, the Trump administration has taken a clearer stance with a new crypto executive order. The focus is on dismantling what many referred to as “Chokepoint 2.0” under Biden - an enforcement-heavy regulatory approach led by previous SEC Chair, Gary Gensler, that left market participants frustrated and uncertain. The shift in direction signals an ambition to position the US as a global leader in digital assets.
A government-backed industry focus group has been formed, with initial priorities centered on stablecoin regulations and securities classification. Trump has also maintained his pledge to shut down any chance of a central bank digital currency (CBDC). Surveillance and compliance measures remain an open question, but before those discussions can happen, the foundational regulatory framework needs to take shape. Progress is underway, but meaningful clarity will take time.
Regulation in flux: Clearer rules or new challenges?
Talk of deregulation efforts often raise as many questions as answers. While the goal may be clearer rules, will these reforms truly deliver clarity, or are firms entering an era of heightened complexity as they navigate overlapping and evolving requirements? Regulatory evolution demands a dynamic, risk-intelligent approach. Removing regulatory red tape is not a green light to reduce controls. Instead, regulatory change must be considered within a broader market abuse risk assessment, with controls being influenced by a myriad of factors.
- Comprehensive risk mapping: Conduct a granular assessment of market abuse and regulatory risks - across all relevant jurisdictions, with a potential bias towards the highest level of regulation - establishing a clear baseline of inherent risks across the organisation.
- Control overlay and risk calibration: Systematically overlay existing controls against identified inherent risks. This critical comparison reveals residual risk - the exposure that remains after control mechanisms are applied. The delta between inherent and controlled risks offers strategic insights into your risk management effectiveness.
- Risk-based remediation: Conduct a detailed analysis to identify business units and product lines with the highest residual risk profiles. This targeted approach enables:
- Precise resource allocation
- Identification of areas requiring enhanced control mechanisms
- Strategic opportunities to streamline or remove redundant controls
- Data-driven prioritisation of risk mitigation efforts
Regulations may shift, but your compliance framework shouldn’t have to. eflow provides the flexibility and technology firms need to stay ahead - adapting to regulatory changes without unnecessary complexity. Whatever the direction of policy, we ensure your compliance processes remain seamless, efficient, and built for the long term.
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