How Crypto May Swing the November Elections

by | Jun 4, 2024 | Biden Administration, Blog Articles, Crypto, Elections, Finance, Politics, USA

Even if you care nothing about crypto, it is important to recognize that crypto voters have now mobilized into a powerful and increasingly unified political force that is likely to significantly influence, if not outright shape, the outcome of 2024’s presidential and congressional elections.

Last week, President Joe Biden vetoed a joint congressional resolution (easily passed by both the House and Senate) that would have repealed an onerous Securities and Exchange Commission (SEC) accounting guideline that prevents banks and other regulated financial institutions from holding digital assets such as Bitcoin (BTC) or Ethereum’s token (ETH) in custodial accounts for their clients. Banks asserted, and Congress agreed, that the administrative rule (it is not a law) has a chilling effect that inhibits financial institutions from serving the digital asset industry and working with their customers who want to interact with it. The veto was the latest in a long series of anti-crypto actions taken by the Biden administration and the SEC, and this hostile stance is now backfiring on the entire Democratic Party and their hopes for November’s elections.

It is fair to say that at the start of Biden’s term, the crypto industry was a melting pot of political views, mostly lying somewhere between apolitical, centrist or left-leaning, with a hearty dash of libertarianism thrown in the stew. This has fundamentally changed. After four years of relentless attacks by Biden and his congressional ally Senator Elizabeth Warren (D-MA), along with her self-described “anti-crypto army” in the Senate and House, further aided by the SEC’s practice of regulation by enforcement, crypto industry participants have decided they’ve had enough of the persecution. They are now aligning around pro-crypto candidates at every level of government.

The Democratic Party—apparently other than Biden himself and Sen. Warren’s camp—have woken up to the danger. Around ten Democrats in each chamber joined House Republicans last month in passing the now-vetoed resolution. Separately, just last week, 71 House Democrats crossed party lines to join the Republican majority in passing the Financial Innovation and Technology for the 21st Century Act (“FIT21”), another piece of crypto legislation that would clarify regulation of U.S. crypto markets. Pushing back on the SEC’s regulatory landgrab, FIT21 would designate the Commodity Futures Trading Commission (CFTC) as the primary regulator of digital assets. FIT21 would also more clearly define what makes a digital token a security or a commodity, and set consumer protections for their use. The SEC itself, in an apparently political maneuver, dramatically reversed course at the last minute and just days ago cleared the way for trading Ethereum spot ETFs in the U.S. after months of opposition. This caught the markets, which were expecting a rejection, off-guard, and ETH prices rose by over 25 percent in a week. Speculation ensued as to whether the SEC had been given instructions from somewhere on high in the Democratic Party.

Whether the shifting position of such a large number of Democratic legislators and the SEC itself reflects a true change of heart towards crypto or merely a near-term and tactical political calculation—i.e., recognition that a disaster is looming—is unclear. But with Biden’s continued resistance, it may be too little, too late for the Democratic Party. Both the presumptive GOP nominee (and former president) Donald J. Trump and independent presidential candidate Robert F. Kennedy Jr. have firmly declared their support for the digital assets industry and its beleaguered American entrepreneurs, and have made campaign promises accordingly to unwind the Biden administration’s policies. This has caught the attention and praise of crypto industry participants, and sent warning bells ringing.

This matters, because there are believed to be somewhere between 20 and 50 million crypto users in the United States. Demographically-speaking, potential crypto voters are younger, are more likely to identify as independent, and to date have not been very politically involved. For many, 2024 will be their first election cycle. They are aggrieved, and many are likely to vote crypto as a single issue.

While all this was going on in the background, the most dramatic news of last week was that Donald J. Trump was convicted—in a Manhattan courtroom by a jury of twelve—of 34 felony counts related to hush-money payments made in 2016. Whether or not this conviction will manage to stand on appeal, its effect on voters is already clear. Trump’s campaign announced it raised a record $53 million in the twenty-four hours following news of the conviction, and preliminary polls show no statistically significant change of support amongst likely voters.

Indeed, for many voters, their previously-held views are firmly cemented and will not likely change on this or any other news. The wild-card variable is now the crypto vote. Wherever it lands, whether largely on Trump or on Kennedy, it does not bode well for the Biden camp.

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