The Crypto Industry’s Influence on U.S. Elections is Bigger Than Ever, Industry Insiders Say

This text discusses the potential impact of the upcoming U.S. presidential election on the crypto industry. It mentions that former President Donald Trump’s stance on crypto has softened, and he may be open to accepting campaign donations in cryptocurrency. Vivek Ramaswamy, a former Republican presidential nominee contender, had more crypto-friendly policies which could influence Trump if he is elected again.

As a researcher studying the crypto industry, I’ve noticed an escalating effort to make their presence felt in Washington D.C. The goal: shape the outcome of the upcoming U.S. elections and secure a favorable regulatory landscape for cryptocurrencies. This involves investing significant resources into funding pro-crypto candidates and providing educational materials to lawmakers, with the ultimate aim of establishing a crypto-friendly legal framework.

Political action committees (PACs) with a focus on cryptocurrencies, such as Fairshake, have effectively influenced election results. With approximately $85 million in donations from various crypto businesses, executives, and individual investors, they played a significant role in the defeat of Congresswoman Katie Porter (D-Calif.), who had been critical of cryptocurrencies, by investing around $10 million in her opponent’s campaign.

As an analyst, I’ve discovered that Fairshake has contributed significantly to two political action committees (PACs) – Defend American Jobs and Protect Progress. The former supports Republican candidates, while the latter backs Democrats. Both PACs have previously funded successful campaigns. In the recent past, Defend American Jobs has invested close to half a million dollars on media advertising for Mark Messmer, an Indiana state senator, who clinched the Republican nomination for the 8th district congressional seat in Indiana this week.

Certain Democratic candidates supported by ProtectProgress in the primaries, such as Shomari Figures in Alabama’s House race and Julie Johnson in Texas, have secured their victories with media buying assistance.

As a researcher studying past election cycles, I’ve never encountered a level of involvement or impact from a crypto lobbying group like the one led by Kristin Smith, CEO of the Blockchain Association.

Crypto skeptics among industry watchers, such as Sen. Sherrod Brown (D-Ohio) and the Senate Banking Committee chair, have softened their positions due to the significant economic influence of the cryptocurrency sector. Fearing potential strong-armed campaigns from industry backers during his re-election campaign this year, Brown has become more receptive towards crypto.

Previously, Brown was not in favor of cryptocurrencies. However, he recently expressed a willingness to explore legislating this field, according to Kyle Bligen, director of financial policy at the Chamber of Progress. Bligen believes that Brown is aware of the financial contributions from industries seeking politicians who support reasonable and innovative cryptocurrency policies, rather than solely protecting traditional financial systems.

As a seasoned crypto investor, I’ve witnessed several attempts by our industry to shape national elections’ outcomes, with limited success and in some cases, even leading to legal repercussions, such as the case of former FTX CEO Sam Bankman-Fried. However, the political influence of crypto is evolving and gaining more traction these days.

“Smith expressed that the industry has evolved significantly. He used to be known as someone who worked in the small-scale blockchain sector, but now people recognize it as a formidable force in Washington, wielding considerable influence and employing various means to make an impact.”

All eyes on the Presidential

As an analyst, I’ve observed that the crypto industry has primarily directed its advocacy efforts towards influencing Congressional elections. However, it’s essential to recognize that the outcome of the U.S. presidential election can bring about substantial changes in crypto regulation as well.

Based on a single survey conducted by Paradigm, a cryptocurrency investment firm, there is a tendency among crypto owners to support Donald Trump for president. However, it’s important to note that the number of voters holding crypto is minimal according to other polls. Currently, wagers on Polymarket lean towards Trump with a 47% chance of winning compared to Biden’s 44%. Nevertheless, industry professionals are uncertain about the potential benefits of a Trump presidency for cryptocurrency.

During Trump’s presidency, he publicly expressed his dislike for cryptocurrencies. However, more recently, he has shown a more lenient attitude towards them. In fact, he stated this week that he would consider accepting crypto donations for his campaign. In an interview with CNBC earlier in the year, Trump revealed that he had personally invested in the stock market and had sold some non-fungible tokens. He expressed uncertainty about interfering with crypto at present but hinted that he might take action if it threatened the primacy of the US dollar as the global currency.

As an analyst, I’ve observed shifts in Trump’s cryptocurrency stance, but it remains significantly less supportive than Vivek Ramaswamy’s position during the Republican presidential nomination race. Instead of dismissing or criticizing crypto, Ramaswamy vowed to safeguard developers and establish a clear regulatory framework where most tokens would be categorized as commodities.

Despite Ramawamy being ruled out as a potential running mate for Trump, industry experts believe that his cryptocurrency policies may still shape Trump’s stance if he wins the election.

According to Lee Bratcher, founder and president of the Texas Blockchain Council, Trump turns to Vivek for guidance on technology and digital asset policies. Previously, Trump didn’t rely on his advice, but after recognizing how effectively Vivek appealed to Republican voters – as well as a broader base that Trump may not reach – Trump has likely become more intrigued by this policy area.

Biden, re-elected

Industry insiders were split on whether a Biden re-election would be bad for the crypto industry.

Smith expressed that it was probable for things to continue as is with regard to regulatory instability and rigorous enforcement from the Securities and Exchange Commission (SEC), unless Chair Gary Gensler chose to resign. A more lenient and open-minded SEC leader, she emphasized, would bring about significant relief.

During the early stage of the Biden Administration, there was initial enthusiasm towards cryptocurrencies. However, unfortunate events occurred within the industry while regulatory reports were being prepared. Consequently, the administration finds itself in a challenging position regarding crypto at this time. The industry experienced some setbacks under Biden’s watch, which explains the regulators’ apprehensions.

As a crypto investor looking back at the events of 2022, it’s clear that the industry has bounced back in many ways from the collapse of major players like FTX, Terra/LUNA, and Three Arrows Capital. However, I can’t help but remember that regulators have a much longer memory than the market. They’re still keeping a close eye on our actions and will likely take action if they see any signs of misconduct or non-compliance with regulations.

As a crypto investor, I believe bringing new regulatory bodies into the conversation would invigorate stalled discussions.

Some individuals, including Bligen, expressed optimism that crypto-friendly laws would be enacted after the election if Joe Biden wins and remains in office.

“If President Biden gets reelected, it doesn’t mean a defeat for cryptocurrency supporters, as Democrats and Republicans are collaborating under his regime to create constructive and accountable cryptocurrency laws through bipartisan efforts,” explained Bligen.

In the present Congress, initiatives are underway to approve cryptocurrency-related laws, featuring a bipartisan proposal aimed at governing stablecoins.

Challenges to progress

Previous attempts at passing crypto-related legislation have encountered obstacles in the past and face notable challenges yet, such as garnering greater support from congressional members.

Bligen pointed out that numerous Congress members possess limited knowledge about crypto. The information they do have is primarily derived from sensational news headlines about cryptocurrency frauds, misrepresented coins, and defrauded investors, as well as the collapse of major crypto institutions. Consequently, their perspective is shaped by a protective stance.

As a crypto investor, I strongly believe that spreading awareness and understanding about cryptocurrencies is essential for bringing more people into our community. Every office, whether it’s a business or a government agency, should have a foundational knowledge of what cryptocurrency is, why it matters to their stakeholders, and the regulatory landscape that governs it. This information is crucial to prevent misunderstandings and confusion, especially regarding blockchain technology. To achieve this goal, more focused education initiatives need to be implemented. It’s not enough to hope for a more educated population by 2025; we must put in the effort now.

Bratcher noted that aside from focusing on educational initiatives, the industry might need to be prepared to concede on certain matters, such as privacy, to foster significant advancements in collaboration with legislators.

I find myself at an intriguing juncture regarding privacy matters. The recent clampdown on Bitcoin mixing services such as Tornado Cash and Samourai Wallet is noteworthy.

As a crypto investor, I understand the importance of maintaining privacy in our industry. However, when it comes to dealing with government entities and law enforcement, we cannot make sweeping statements prioritizing privacy over all else. Instead, there must be a delicate balance between protecting individual privacy and addressing concerns related to money laundering and national security.

Bratcher pointed out that the unsavory practices of privacy services such as Samourai, who openly targeted “dark/grey market participants” with their mixing services, significantly complicate collaborations with elected representatives.

Bratcher expressed his unwillingness to strongly defend Tornado Cash, stating that it might not be worth fighting for to the point of making significant sacrifices. He added a cautionary note, implying that focusing too much on this specific issue could potentially lead to losing bigger battles or even the entire war.

State-level politics

While the focus is primarily on national elections, figures such as Bratcher and Dennis Porter, CEO and co-founder of Satoshi Action Fund, are instead directing their energies towards influencing state politics.

Porter’s team has played a crucial role in proposing legislation in 16 American states to safeguard bitcoin mining and self-custody. The most advanced bill is currently in Oklahoma, having been approved by both the House and Senate. It now awaits Governor Kevin Stitt (R) for final approval.

“Washington D.C. is an exciting and alluring place with significant financial investment. However, major victories have yet to emerge; instead, significant struggles take place at the state level,” Porter explained.

Porter recommended that the industry should expand its influence in Washington, D.C., yet cautioned that finding a solution to all its problems there would be no simple fix.

Porter proposed approaching this issue by focusing on individual states: “We’ll advocate for pro-digital asset policies at the state level. States will serve as laboratories for democracy in shaping these regulations. Ideally, effective state-level policies will later influence federal legislation. At a minimum, we aim to establish protective regulations for people within each state.”

Drawing inspiration from the cannabis sector’s approach, Porter’s framework for crypto regulation advocates for amassing state-level backing and influence before shaping federal legislation.

“In our persistent attempts to hit home runs in Washington D.C., we don’t have enough power just yet, according to Porter. He believes we’re further from this goal than we assume…My major takeaway is that we should focus more on the state level and allocate significantly more resources there. The massive sums of money being poured into Washington could make a tremendous difference at the state level, drastically altering the policy landscape for Bitcoin and digital assets in the United States.”