US Election - Crypto Has Become a Campaign Issue
US Election
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Crypto Has Become a Campaign Issue
This Thursday, June 27th, will mark the first presidential debate of the 2024 election season, where incumbent President Joe Biden will face former President Donald Trump in a highly anticipated rematch.
This time around, early indications suggest that voters who are pro-innovation and pro-crypto could significantly influence the outcome of the election.
A Close Election Expected
For those who may not remember, Biden narrowly defeated Trump in the 2020 election, winning the electoral college despite a close contest in key states. As NPR's Domenico Montanaro noted, "Just 44,000 votes in Georgia, Arizona, and Wisconsin separated Biden and Trump from a tie in the Electoral College." Trump is no stranger to close victories, having won the 2016 election by just under 80,000 combined votes in key states.
With this election appearing too close to call, and the upcoming rematch now underway, blockchain policy has emerged from the political sidelines to take center stage, and potentially impact the result of the race.
Already more than a million voters have signed up to Stand with Crypto (just one of many pro blockchain lobbying and campaigning groups) and the candidates know just a modest percentage of those voters might win the day for them.
Pay Close Attention to Candidates Stance on Crypto Policy
The first Trump-Biden debate in 2020 attracted 73 million viewers, underscoring the high stakes and broad interest. Based upon recent announcements from the Trump campaign, it appears that crypto may play an important role on Thursday night.
A political shift is important to the rate of adoption of blockchain technology. The US has fallen well behind Asia and Europe in this domain. Unleashing the full economic power of the US and its rich capital markets on the blockchain ecosystem would have a tremendous impact.
Recent developments in Washington in the Senate, House of Representatives, and across the Judicial system have made us even more optimistic about the timing for the launch of our new fund of funds (Fund VII), which has recently launched and will hold its first close later this summer. (Please reach out to ir@blockchaincoinvestors.com to discuss that fund strategy directly.)
The Biden Administration and the Democrats Appear to Be Softening Their Stance on Crypto Policy
For those following blockchain policy in the US, the last few years have been incredibly challenging for the industry. However, this has been changing very rapidly this year. If you read our recent newsletter, US LEADERSHIP WAKES UP – AMERICA IS JOINING THE DIGITAL FINANCE RACE, you know that after nearly four years of aggressive action against the blockchain industry, the Democratic party has recently appeared to soften its approach.
Below is a summary of recent events evidencing this shift:
1. Senate Votes to Repeal SAB 121 (May 16th)
21 Democrats joined Republicans in the House.
Notable votes included high-profile lawmakers like Senate Majority Leader and Democrat Chuck Schumer.
2. SEC Approves Eight Spot Ethereum ETF Applications (May 24th)
Just one day earlier, Bloomberg Intelligence had placed the odds of an SEC approval of spot ETH ETFs at only 25%.
3. House Passes FIT21 Act (May 24th)
A House vote included 71 Democratic lawmakers joining a majority of Republicans to pass the FIT21 Act.
4. SEC Chair Gary Gensler Estimated S-1 Approvals for Spot Ether ETFs by End of Summer (June 13th)
5. SEC Closes Its Investigation into Ethereum 2.0 (June 18th)
The unexpected disclosure suggests that the SEC will not label ETH a security.
What’s more, earlier this month, it was reported that the Biden campaign is holding discussions about accepting bitcoin and cryptocurrency donations through Coinbase according to The Block, citing anonymous sources. This would be an astonishing development given that Biden’s SEC is suing Coinbase for running an illegal securities exchange.
Additionally, an email leaked last week from California Congressman Ro Khanna's office revealing that officials from the Biden administration, the House, and the Senate, along with Shark Tank billionaire Mark Cuban, are due to meet in early July for "the most significant meeting between policymakers and innovation leaders in blockchain to date."
So, what’s all happening here?
The Political Influences Shaping This Shift
If you had gone to sleep on May 1 and woken up on June 20, you would hardly recognize the world into which you awoke. The political winds have undoubtedly shifted. Now, crypto policy appears to be moving toward the bipartisan center while also becoming an issue of national importance.
What’s driving this change?
While of course national politics are complex, we wanted to highlight two major factors influencing this shift:
Former President Trump has Seized the Political Advantage
The Blockchain Industry Is Now Organized and Heavily Funded
Trump’s 180 on Crypto – A Political Maneuver with Positive Implications for Blockchain Policy
President Trump has been historically skeptical of blockchain and crypto. In 2019, he wrote:
After leaving office, Trump maintained this critical stance. As recently as 2021, he told Fox Business that bitcoin “Just seems like a scam” and described cryptocurrencies as a “Disaster waiting to happen.”
But everything changed on May 10th of this year, when at a fundraiser in Florida, Trump did a 180 degree about face coming out forcefully for the industry. A Politico article that day, titled ‘Crypto is Trump’s New Weapon Against Biden’ noted, “Donald Trump is making presidential history all over again: He’s poised to be the first major party nominee to court cryptocurrency traders. It’s leaving some Democrats feeling uneasy.”
Almost immediately, crypto became front and center. “President Trump’s remarks signal a sea change in the importance of digital assets this election cycle,” said Kristin Smith, CEO of the Blockchain Association, a top crypto industry lobbying group.
Since, mid-May, Trump has doubled down on this stance, promising to become the "crypto president," and advocating for the United States to lead in the cryptocurrency industry. He has criticized President Biden's administration for its regulatory approach to crypto, highlighting a sharp contrast between their positions.
Trump has also begun meeting regularly with blockchain industry leaders, including meeting the heads of US-based Bitcoin miners, stating he wanted all the remaining Bitcoin to be mined in the USA.
Trump's recent shift to support crypto is a politically astute move, considering the significant demographic and economic factors at play. With over 50 million (some sources say 90 million) Americans owning cryptocurrencies, and 34% of individuals aged 24-35 invested in digital assets, the digital native generation is fully bought into the benefits of blockchain technology. These voters view crypto as a path to innovation, financial inclusivity, and economic growth. By embracing crypto, Trump aligns himself with a rapidly growing and influential voter base.
There are only 160 million voters in America, and those of them who are supporters and advocates for blockchain are highly motivated and potentially likely to be single-issue voters, strongly backing candidates who support their cause.
On the other hand, the anti-crypto coalition is weak at best, with relatively few people considering it their defining issue. As Anthony Scaramucci, Trump’s former White House communications director puts it “Only 65 million Americans own dogs – to be anti-dog would alienate a large portion of the voter base. Why alienate 90 million who own crypto?”
Biden doesn't gain significant voter support by maintaining a strong anti-crypto stance, but Trump stands to gain a substantial number of votes by being staunchly pro-crypto.
The Blockchain Industry Is Heavily Organized and Funded
Unlike the last election-cycle, there are now notable lobbying groups and formidable super PACs supporting and advocating for the crypto industry. Super PACs backed by the cryptocurrency sector have raised more than $102 million, the third-most of all super PACs engaged in the 2024 election, according to data from Opensecrets.org.
Earlier this month, venture capitalist David Sachs hosted a fundraiser for Trump in Silicon Valley. Notable attendees included Chamath Palihapitiya and the Winklevoss twins. Trump reportedly raised more than $12 million alone at this fundraiser.
This funding is having an immediate effect, as evidenced by the defeat of Katie Porter, a staunchly anti-crypto candidate’s, loss in the California Senate primary. As noted in a Los Angeles Times article titled “How Cryptocurrency Executives Helped Decide the California Senate Primary,” the $10 million bill for advertisements designed to bump Katie Porter out of the race for a rare open Senate seat was footed by a super PAC called Fairshake, funded by cryptocurrency companies and their executives.
Moreover, groups like Stand with Crypto are making significant impacts in races around the country, on both sides of the aisle. Stand with Crypto recently released a list of 22 endorsements, including 12 Republican and 10 Democratic candidates.
The combination of these factors is already impacting races—something that both Trump and Biden are clearly watching.
The View from London: What to Watch for in Thursday’s Debate
Regardless of your political views, the developments over the past two months have been very positive for the blockchain industry. Prior to Trump’s political shift, the Biden administration’s agencies were acting aggressively against the industry, while the key issues remained on the political sidelines far from the public’s attention.
Trump recognized that the Biden administration was out of step with the US electorate and seized the political advantage by moving to the center and forcefully pushing the issue to the forefront.
Since then, President Biden’s SEC has approved the Ethereum Spot ETH and many Democratic senators and house members have voted for common-sense blockchain policy. For those of us in the industry, this is exactly what we’ve been waiting for – what’s best for the blockchain policy is bipartisan support for common-sense regulation that fosters innovation.
However, the current President has so far only softened his rhetoric, making subtle attempts to court the industry by accepting donations in crypto and holding meetings with industry leaders. Yet, rumors in Washington suggest a major policy shift may be imminent.
We will be watching closely. Here are three things we expect to see from the debate:
Trump to Criticize Biden's Crypto Policy Record
We expect Trump to double down on criticizing the Biden administration's track record on crypto policy, particularly highlighting the SEC’s overreach, including lawsuits against Coinbase and Kraken, which have only served to push innovative companies offshore. Moreover, he will likely emphasize his strong opposition to Central Bank Digital Currencies (CBDCs), especially in the context of China’s ambitions in that domain.
Although it's not highly anticipated, it would be a pleasant surprise if he addresses how stablecoins can reinforce US dollar dominance and potentially stave off a debt crisis, similar to points made by former House Speaker Paul Ryan in a recent Wall Street Journal op-ed. This would demonstrate Trump’s evolving understanding and continued learning on blockchain policy.
Biden May Endorse Comprehensive Crypto Regulation
President Biden finds himself in a tricky position. With Trump politically flanking him on the crypto issue, Biden is being forced to soften his stance, yet he will likely avoid directly criticizing his own SEC, which has been issuing aggressive enforcement actions for several years.
The debate may present a good opportunity for Biden to announce his support for a regulatory framework for the industry, positioning himself as a smart regulator who wants to foster American innovation and create jobs.
If Biden goes on record supporting stablecoin legislation or a market-structure bill, it would undoubtedly be bullish for the industry.
Biden’s language and tone will be important here – we could leave this debate with both candidates openly courting the pro-blockchain vote.
Positive Impact on European Elections in the UK and France
Finally, we cannot watch the debate without considering the potential impact these candidates' positions may have across the Atlantic. Europe has experienced a tectonic political shift this year; in recent European Parliamentary elections, right-leaning parties performed exceptionally (and surprisingly) well, threatening to upend longstanding EU policies on climate, regulation, and immigration. At the same time, the UK and France are both slated to hold domestic elections—the UK election on July 4th and the French election from June 30 to July 7.
Unlike in the US, crypto policy is not yet front and center in these elections, but European leaders are closely watching US developments. In the next Letter from London, we’ll discuss the outcomes of these elections on this side of the Atlantic and their impact.
Thank you for reading,
Mitch Mechigian
Partner, London
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