The US political landscape has reshaped itself dramatically in the last few weeks, potentially giving a peek at the contours of a new era for crypto policy and regulation in this country.
President Joseph R. Biden, who has presided over a surprisingly hostile administration in regard to crypto, has decided not to seek the Democratic party’s nomination for President, and has instead endorsed his Vice President, Kamala Harris, for the position. Harris has yet to weigh in on blockchain technology or crypto publicly, but guesses can be made about a potential Harris administration’s positioning. On the other side of the aisle, former President Trump has made it clear that crypto is near the top of the list for communities he wants to appease, and he’s taking his first opportunity to speak directly to the heart of the crypto community in the United States at this weekend’s Bitcoin gathering in Nashville.
This is undoubtedly a historic moment in presidential politics and US history. But what does this mean for crypto?
The Short Term: Uncertainty on Complex Policy in a Turbulent Time
Election years, and presidential election years in particular, are historically tough times to get complicated legislation over the finish line in Congress. Members have to make frequent trips back to their home states and districts to keep in touch with their constituents, and their records are watched very closely by voters and special interest groups who aim to keep them accountable. Unfortunately, this means that nuanced, bipartisan votes are rarer than usual, as they get very hard to explain in a soundbite that could make or break a reelection campaign.
With an issue like crypto, even if it isn’t as politically dangerous an issue compared to hot-button topics like immigration, healthcare, taxation, or reproductive rights, the legislation itself is very complex and requires significant staff time to wade through effectively. A commodity in short supply at this busy time of year.
The Senate Agriculture Committee, led by a retiring Debbie Stabenow, has been struggling to gain support for a new market structure bill focused on digital commodities. With the increasingly complex political landscape, the Chairwoman will now have to work even harder to gain her colleagues' attention. The bill itself aims to provide a clear regulatory framework for digital commodities, which is sorely needed in the ever-evolving crypto space. However, the nuances of the bill require careful consideration and a deep understanding of the technology and its implications. This is a challenge, especially with the current political climate where members of Congress are more focused on their re-election campaigns than on passing intricate legislation.
Another short-term factor to consider is the role of regulatory agencies. The Securities Exchange Commission (SEC), under the leadership of Gary Gensler, has taken a hard line on crypto, focusing on regulation through enforcement. This approach has created uncertainty and hindered innovation within the industry. Gensler's stance is unlikely to change in the short term, regardless of who wins the presidency. However, a new administration could influence the overall direction of the SEC and other regulatory bodies, potentially leading to a more balanced and nuanced approach to crypto regulation.
The Medium Term: Hope for A More Open-Minded Executive
Biden’s choice not to accept the Democratic nomination means that his administration - and its often open hostility toward crypto - is on the way out for certain. This doesn’t tell us exactly how the executive will see the industry next year, but we can bet it will be different.
Trump has been working hard to court the crypto industry and crypto-focused voters over the last several months, with his biggest moment yet coming this weekend as he addresses the Bitcoin faithful in Nashville. He’s saying all the right things but has yet to articulate clear policy objectives that indicate a deep understanding of the technology and the ecosystem, or a commitment to follow through.
Unlike former President Trump, Harris does not have any meaningful rhetorical record regarding crypto and will not be taking the opportunity to speak to the community in Nashville, though we’ve recently learned she was invited.
The Vice President’s relatively young age makes her considerably more likely to be open-minded toward the capabilities of blockchain-based technology than the current president. Anecdotally, crypto is developing into much more of a generational issue than a strictly partisan one. The average age of the 71 Democrats who voted for the passage of the FIT21 bill in the House in May is a decade younger than the age of those who voted against it. But age alone does not guarantee anything. At the very least, there would likely be some personnel carried over from the Biden administration in her early days as Commander in Chief, and as they say in Washington: "Personnel is Policy." And beyond the White House, the Securities Exchange Commission’s Chair, Gary Gensler, would almost certainly stay in place through the opening of a Harris Administration, continuing the unproductive practice of regulation through enforcement.
The Long Term: Generational Change
The long-term outlook for crypto regulation has always revolved around the necessity for Congress to do its job, to draft and pass legislation that will enable crypto, and DeFi in particular, to thrive in the United States.
Despite falling short of passing meaningful legislation into law so far this year, a lot has happened that should give watchers of the space some hope regardless of which candidate takes office next year. Trump has already motioned that he’ll be helpful, and the Democrats have started to moderate their stance. Forward-looking elected officials sent a message to the White House with their votes on crypto legislation in both chambers when they had a chance on the floor. In the House, an astonishing 71 Democrats voted for a bill widely seen as “pro-crypto” giving it a bipartisan majority. And in the Senate, a dozen Democrats surprisingly voted to repeal harmfully crafted policy issued by an SEC led by a chair appointed by their own party.
Voters are already making their voices heard by moving pro-crypto and open-minded candidates forward in primary races across the country, and we can only assume that trend will continue through the general election in November. As the Congress becomes younger, and transitions to a new generation, things are likely to move in favor of crypto.
The evolving US political landscape presents both challenges and opportunities for the future of crypto regulation. As the Biden administration steps back, the potential for a shift in policy under new leadership, whether from Harris or Trump, brings a sense of cautious optimism. The immediate legislative hurdles and regulatory uncertainties persist, but the growing generational support for crypto and evolving bipartisan engagement indicate a promising future. The key to long-term success will be the ability of Congress to craft and pass legislation that fosters innovation while providing clear regulatory guidance, ensuring that the US remains a leader in the rapidly advancing world of blockchain and digital assets.