CFTC Chair appoints cryptocurrency lawyer to the cabinet, promises to initiate a friendly regulatory revolution

CFTC Chair Michael Selig appoints cryptocurrency lawyer Michael Passalacqua as senior advisor. Passalacqua previously facilitated the SEC in issuing a no-action letter, allowing state trust companies to serve as crypto custodians. Selig commits to a future-oriented regulatory approach, ending enforcement-based regulation, and ensuring digital asset economic development through tailored rules, marking a new phase of crypto-friendly policies under the Trump administration.

CFTC appoints senior crypto lawyer as core think tank

In a notice released on Tuesday, Selig announced that Michael Passalacqua, a crypto lawyer from the former international law firm Simpson Thacher & Bartlett, will join the CFTC as a senior advisor. Selig noted that Passalacqua has extensive experience in “financial regulation involving crypto assets and blockchain technology.”

“Early in his career, Passalacqua served as assistant general counsel at a crypto asset capital markets firm, providing advice on a range of regulatory and trading issues related to crypto assets,” Selig said. According to Simpson Thacher & Bartlett, Passalacqua participated in drafting a letter that prompted the SEC to issue a no-action letter, permitting state-chartered trust companies to act as crypto custodians.

The influence of this letter should not be underestimated. In September, the SEC’s Division of Investment Management stated it would not recommend enforcement action against advisors using state trust companies as crypto custodians. This policy shift opened compliance pathways for the crypto custody market, allowing traditional financial institutions to enter the digital asset space with greater confidence. Passalacqua’s legal career began at CrossTower, a crypto exchange that ceased operations years ago, after which he worked at two well-known law firms on digital asset legal matters.

As the CFTC’s role in crypto regulation becomes increasingly important, Selig appointed Passalacqua and former Treasury Department official Carmichael as senior advisors. Selig stated that the CFTC is working to make its regulatory approach “future-oriented,” and mentioned a bill currently under review by the U.S. Senate that would grant the CFTC “a series of new broad responsibilities” in the digital asset market.

“Future-oriented” regulatory revolution core strategy

The “new policy” announced by Selig on Tuesday reflects a perspective that seems to warn traditional financial firms they will have to compete with a new wave of entrants into the U.S. financial industry, who will enjoy tailored rules. “In the coming days, we will announce more policy adjustments,” Selig posted on social media platform X, and also published an op-ed in The Washington Post.

His approach aims to protect the new policy “from interference by unlawful regulatory agencies.” “We will end enforcement-based regulation and ensure the vibrant growth of new domestic markets through tailored rules, maintaining the U.S. market’s position as the best in the world,” he said, noting that “the digital asset economy has grown from a novelty into a $3 trillion market.”

Selig’s three policy pillars

End enforcement-based regulation: shifting from “enforce first, regulate later” to “regulate first, enforce later,” providing clear compliance pathways for crypto companies

Tailored rules: developing specific regulations for innovative areas such as digital assets, prediction markets, and perpetual futures

Future-proofing: ensuring policies are difficult to overturn after regime changes through formal rulemaking processes

Selig said that another new initiative—establishing an innovation advisory committee—will help guide this work. “The spirit that drove American farmers to settle the Great Plains now inspires innovators to break tradition and explore uncharted territories,” Selig said. “They are leveraging technologies like blockchain to modernize the traditional financial system and build a new financial infrastructure.”

Although he did not mention ongoing efforts in Congress to draft new cryptocurrency laws, he referenced the labor-intensive process of formal rulemaking, which means future leaders from other parties will find it difficult to simply overturn these rules. This contrasts with other regulatory agencies under the Trump administration, which often rolled back early informal guidance from the Biden era.

CFTC leadership vacuum and political game

Following the resignation of Acting Chair Caroline Pham, Trump nominated Selig to succeed her. He is the only remaining commissioner after the agency’s leadership overhaul in 2025. As of Tuesday, Trump has not announced any plans to nominate others to fill the CFTC vacancies, whether Republicans or Democrats.

The CFTC is typically composed of five commissioners, including the chair, with up to three from the same party. Currently, Selig is the sole commissioner, with full decision-making authority, but this single-person situation is extremely rare in the agency’s history and raises questions about decision legitimacy and representation. Last year, Trump faced repeated hurdles in confirming a CFTC chair candidate in the Senate and ultimately abandoned his first choice—former commissioner Brian Quintenz.

During Trump’s first year in office, Pham led the agency, with a focus on crypto policy. She left the CFTC last month to join crypto company MoonPay. During her tenure, she initiated several measures, including close cooperation with the SEC to develop digital asset regulation. Her departure and Selig’s appointment mark a shift from incremental reform to a more radical restructuring of the CFTC.

Crypto lawyers and industry observers generally see Passalacqua’s appointment as a key step in Selig’s policy implementation. An anonymous lawyer familiar with CFTC operations said, “Passalacqua not only understands the law but also has a deep understanding of the practical needs and pain points of crypto enterprises. This industry perspective is exactly what past regulators lacked.”