Crypto Industry Eyes US Election for Regulatory Shift
The cryptocurrency industry is pouring millions into this year’s US elections, seeking to influence the regulatory landscape and hoping for more favorable policies. This push comes amid a backdrop of skepticism from financial regulators and a looming presidential battle between Donald Trump and Kamala Harris, whose positions on crypto sharply contrast.
According to the chair of the US Securities and Exchange Commission (SEC), Gary Gensler, the crypto industry is “rife with fraud and hucksters and grifters.” He contends that investors globally have lost substantial sums due to crypto companies’ failure to comply with SEC regulations.
This year’s election includes races for all 435 House of Representatives districts and 33 of the 100 Senate seats, in addition to the presidential contest. The industry’s considerable financial contributions seek to sway these outcomes.
Diverging Views: Trump vs. the Biden Administration
The future of cryptocurrency has become a clear point of divergence between the two main parties. Trump has positioned himself as a champion of the crypto world, aiming to attract votes from enthusiasts with promises to establish America as the “crypto capital of the planet” including a “strategic national bitcoin stockpile.” Recently, he launched a crypto business, World Liberty Financial.
This represents a significant shift from his previous stance, where he dismissed Bitcoin as a scam. In contrast, the Biden administration, with Vice President Harris, has led a crackdown on the industry.
This crackdown has included major cases against key figures. Sam Bankman-Fried, founder of FTX, received a 25-year sentence for fraud after stealing billions. Changpeng Zhao, of Binance, received a four-month sentence and a $4.3 billion fine for enabling illicit activities on his platform. The SEC also has an ongoing case against Binance.
Regulatory Concerns and the SEC’s Stance
Gensler explains that the SEC’s actions are based on laws designed to protect investors. He emphasizes that, since the creation of the SEC in 1934, companies seeking public investment have been required to disclose certain information.
“Crypto is just a small piece of the US and worldwide capital markets, but it can undermine trust that everyday investors have in the capital markets,” says Gensler.
Balancing Innovation and Regulation
While crypto proponents tout its efficiency and security, a Federal Reserve survey showed a drop in American crypto usage, from 12% in 2021 to 7% last year.
Kamala Harris has offered limited public comment on cryptocurrencies. One of her advisors indicated support for policies that allow the industry to flourish. Meetings between her team and industry representatives have been aimed at building trust.
Paul Grewal, chief legal officer at Coinbase, underscores the importance of the election’s outcome noting that “Not only is the US an important market for crypto, but so much of the important technology surrounding it has been developed here. And I think it’s also critically important that we do not lose sight of the fact that the rest of the world is not simply waiting for the US to get its act together.”
Global and Domestic Regulatory Efforts
The US’s stricter approach is mirrored by similar efforts in Europe. However, other regulators, such as the G20, are moving more slowly on establishing standards for cryptocurrencies, which are non-binding. A bill to regulate crypto has been passed by the House but not the Senate.
Grewal supports the bill, advocating for consistent standards for crypto assets, asserting they should be subject to the same regulations as other assets.
With the November elections approaching, the crypto industry sees an opening to influence policy. By last month, the sector had already spent $119 million on political donations, reports Public Citizen, a consumer advocacy group. They note that the goal is “to help elect pro-crypto candidates and attack crypto critics, this is regardless of political affiliation.” The industry has spent more than any other on corporate donations this cycle.
