One big thing – Financial deregulation

Policy and Politics: Get ahead of a fast-moving political environment with this quick read on one big thing to watch in the month ahead coming out of Washington, D.C.

The Trump administration begins to flex its muscle on regulation

One major pillar of the Trump administration’s policy agenda is now coming into focus – regulatory change. Nowhere is this approach more apparent than among financial regulators as they begin to issue guidance and gear up to release their Spring Regulatory Agendas.

Before diving into what the Trump 2.0 administration is expected to do in financial markets, here’s a quick explainer on guidance vs regulation.

What is the difference between regulation and guidance?

Regulation is binding, requiring a formal consultation with the public before it can be finalized, and again if it is revoked. Promulgating regulation takes executive agencies time, usually multiple months, if not years.

Guidance, on the other hand, expresses a regulator’s approach to enforcing existing laws or regulations, and it can be revoked or issued quickly. While it is an important indicator of an administration’s posture on regulation, it can be easily rescinded by the next administration.

Financial regulators under Trump 2.0 have already begun to release guidance that suggests a posture of deregulation. Each agency is expected to release their priorities for regulatory change in their Spring Regulatory Agendas, typically published in June or July. 

The financial industry is watching for a couple of major anticipated changes, regulation of digital assets and rules governing expanded retail, and potentially defined contribution plan access to private investments.

Regulation is coming for cryptocurrencies

In his first week in office, President Trump signed an executive order (EO) highlighting the importance of digital technology to the administration. Among other priorities, the EO called for ‘protecting cryptocurrencies’ access to banking services’ and ‘providing a regulatory framework for cryptocurrencies.’

The Securities regulator, the Securities and Exchange Commission (SEC), has already begun actions to address these priorities quickly. The SEC launched a crypto task force dedicated ‘to developing a comprehensive and clear regulatory framework for crypto assets in the US.’ And, at its May roundtable, the newly confirmed SEC Chair, Paul Atkins, outlined his three priorities for crypto asset policy – issuance, custody and trading.

The SEC also rescinded Staff Accounting Bulletin 121 which addressed safeguarding of crypto assets and was criticized by the financial industry as preventing the banking sector from providing banking services to cryptocurrencies.

The Department of Labor (DOL) has also taken steps to clarify the potential role for cryptocurrencies and other digital assets in retirement plans. In May 2025, the DOL issued new guidance that signaled ‘neutrality’ toward cryptocurrencies and other digital assets in retirement plans, revoking 2022 DOL Guidance which suggested that plan sponsors should exercise ‘extreme care’ before adding cryptocurrencies to their investment menu.

All of these regulatory developments portend a potentially larger role for cryptocurrencies across the financial system. It is worth noting, however,  that the technology is new and it is not yet clear what appetite investors and plan sponsors will have for these investments.

Regulation may prompt a sea change in access to private markets

Since Trump’s inauguration, the SEC has issued guidance, approved applications for exemptive relief, and stated changes in policy that would expand distribution opportunities for private market strategies and the universe of investors who can access them.

SEC Chair Atkins has been explicit in his goal to expand access to private markets. Noting the rapid growth of these asset classes, nearly three times the size they were a decade ago, he stated that the SEC’s approach would “give all investors the ability to seek exposure to a growing and important asset class.”

Among the changes in policy, the SEC will no longer require closed-end funds – with greater than 15% of assets allocated to private funds – to impose a minimum investment of $25,000, and to restrict sales to those who meet the accredited investor definition.

Taken together, the SEC hopes these changes will spur product innovation and provide financial advisors with new products to consider with their clients. And yet, the SEC has emphasized that investor protection, including disclosures around fees, liquidity and conflicts of interest, will be a critical part of this regime.

All of this may be welcome news to financial advisors. According  to the Natixis Center for Investor Insight 2024 Global Survey of Financial Advisors, 56% plan to increase the use of private assets in the next five years, while the same number report  these products have improved outcomes for clients. Nevertheless, client education will be important as 72% of those surveyed said investors do not understand the holding period that comes with private investment.

The DOL has not yet taken action on private markets as the Assistant Secretary for the Employee Benefits Security Administration, who oversees retirement plans, has not yet been confirmed (and may not be until early fall). Nevertheless, if Trump 2.0 tracks with the previous Trump administration, guidance positively expressing the ability of defined contribution (DC) plans to offer private market investments is expected.

In 2020, the first Trump administration’s DOL issued an information letter that suggested that plan fiduciaries may consider offering professionally managed asset allocation funds that contain private equity investments as a part of DC investment offerings. However, the letter also noted that plan fiduciaries must still undertake thorough analysis of these funds and alternatives before adding them to their plan menu. So, even after DOL guidance, uptake among DC plan sponsors will take time and may be limited until better understood.

ESG retirement policy changes on the horizon

In recent years, the role of ESG in retirement plans has been subject to political debate, state lawmaking and federal regulation. The Trump 2.0 DOL signaled in May that it will no longer defend the Biden-era ESG rule against legal challenge, instead opting to promulgate its own ESG rule. The scope of the new ESG rule is not yet clear, but will be closely monitored by the retirement plan sponsor community.

The Takeaways

• New private market investment products may be on the horizon and will require education and compliance training for investment professionals. Financial advisors will need to work with their compliance teams to understand how to present clients with accurate information on conflicts of interest, liquidity and fees, and make sure it aligns with each client’s investment objectives. Similarly, if the DOL moves forward with guidance for DC plan sponsors, they, too, will need to evaluate product appropriateness for their plan participants.
• Cryptocurrencies and related products may become more widely available. As stated in the bullet above, compliance support and education for advisors and investors will be required.

In other political news:

• Congress continues to make progress on ‘One Big Beautiful Bill’ (OBBB) to solidify its tax and spending priorities. As promised, the House made quick work of the bill sending it to the Senate before Memorial Day. The Senate’s self-imposed July 4th holiday may be ambitious as they seek to make a mark on the House bill.  Most likely, the bill will be signed into law before the August recess in Washington. Tax rates for individuals will almost certainly be extended in the final bill, preventing a tax rise, however, the outlook for spending cuts may be less certain.
• Given the OBBB is looking more expensive (see bullet above) and DOGE cuts totaled just $150B, not the original goal of $1T, the US deficit and debt prompted the final of the big three ratings agencies to downgrade the outlook for US debt. Nevertheless, bond markets have presently remained resilient, though the long-term outlook is less certain.
• Tariff uncertainty and some tariffs themselves are likely to stay.  After a trade court ruled that the President had exceeded the authority he used to put ‘Liberation day tariffs’ in place, an appeals court then allowed the duties to remain in place, pending an appeal from the administration. This case could go all the way to the Supreme Court for a decision. Still, the President can keep in place his sectoral tariffs on autos, steel and aluminum and pending duties on pharmaceuticals, lumber, copper and semis. And, ultimately, the President can find other ways to put tariffs in place. While those may not be as quick to take effect or as broad reaching, tariffs are likely to remain a feature of the Trump administration’s economic policy.