Why crypto is not really a partisan issue at all in the US
Crypto adoption in the US is solid and growing, and will continue no matter who wins the White House.
In the rough and tumble world of US presidential politics, we now see increasingly personal attacks previously considered off limits. Against this backdrop, it becomes particularly astonishing when a massive, legitimate issue continues to sit in the shadows. I’m talking, of course, about crypto.
You may say that crypto has been getting attention, but has it? Yes, there have been industry forums, lawsuits and isolated judicial rulings. But the rules of the road for crypto in the world’s largest economy remains murky, with most in Congress remaining hands-off and regulatory stonewalling driving promising projects offshore. Most would agree that the whims of an individual regulator will need to yield to binding legislative action, and soon. This will finally provide the clarity that the sector has long been seeking.
This prompts the question as to where policymakers in each party stand. And what about the two standard bearers that will be battling it out in this year’s presidential election?
Growing interest
But first, let us retrace whether this is even a material issue. After all, isn’t crypto still just for rich, tech-savvy early adopters? Well, no. Even before the recent bitcoin exchange traded fund (ETF) approvals, crypto adoption was solid and growing. Across multiple studies, crypto ownership among Americans was more than 20 per cent in 2021, with growth of over 50 per cent per year. (Ownership figures have since held steady despite the multiple black swan events, resulting downturn and continuing malaise within the sector in 2022 and much of 2023.)
The data becomes more compelling when segmented by historically important voting constituencies, with non-white, women and lower income Americans representing sizeable segments of crypto owners.
And with the last couple of elections decided by a handful of swing states, it should be noted that the segment of crypto owners here far exceeds the margin for error. Nevada, in particular, was a key battleground state in 2020 and ranks in the top 10 by both percentage of the population owning crypto as well as total amount owned.
Finally, we can anticipate the future by looking at the trendlines, where studies find that up to 20 per cent of those who had never owned digital assets said they were likely to buy some within the next year, and a majority said they would consider buying (or adding more) if they could hold it in their bank accounts. This points to an access issue, where buyers otherwise believe. The recent bitcoin ETF launches help to drive us towards that reality.
Political posturing
The crypto vote has the potential to deliver the White House. One would have to believe that Presidents Biden and Trump, along with other legislators, have been reading the tea leaves and see all of this. So what do they all think?
Crypto in the US has been somewhat of a partisan issue… sort of. Of those taking a stance, Republicans had initially been more sceptical but recently turned more positive, citing the prospect for jobs creation and economic expansion. Not surprisingly, this change in sentiment reflects that of Donald Trump, who was bearish at first but then invested in crypto himself and generated substantial licensing fees from the sale of his non-fungible token.
Democrats have been more mixed, with some sharing the excitement about enhanced economic growth and financial inclusion while others express concern about the use of crypto for illicit activities. (It is not known whether President Biden owns digital assets through his blind trust, though prior to the last election he did say that he did not own any bitcoin.)
Despite the rhetoric and posturing, it becomes clear that crypto is not really a partisan issue at all. After all, who is going to disagree with generating economic expansion or eliminating illegal activity? Rather, the two sides are simply focused on different parts of the puzzle, but one puzzle nonetheless. Current disagreements are driven by emphasis, not by ideology (unlike most hot button issues).
Put differently, this is one topic that is set up for a natural convergence and resolution, driven by market realities and challenging yet solvable technology problems.
Working together
Politicians on the leading edge see this, and they are starting to adapt. The House Financial Services Committee recently passed crypto legislation in a bipartisan 35-15 vote. Sponsors of a pro-crypto regulatory framework bill recently teamed up with the authors of the money laundering-focused Digital Assets AML Act to draft an amendment reflecting their common goal of preventing the use of crypto in illicit financial transactions. Early convergence, with more to come.
The specific timing of this convergence may be impacted by the results of the election. Mr Trump is expected to support increasingly pro-crypto policymaking, which may portend a smoother road ahead for the sector. In contrast, the level of momentum within a Democratic administration may depend on whether party sceptics or bipartisan advocates command the louder voices. This may lead to greater uncertainty and a bumpier road ahead. Mr Biden’s re-election would also create the prospect of Gary Gensler continuing as SEC chair, which may impede progress given his generally unpopular view within the sector that no new rules are required. However, this could serve as a catalyst for Congress to take more rapid action, assuming they see the data and do not want to start losing voters.
The results of the election will likely have implications for the near-term development of the sector, but we can take comfort in knowing that we will eventually get to the same endpoint. The long-term outlook for US crypto enthusiasts is good – regardless of what happens this November – with expected legislative harmonisation and a market opportunity that is now as immutable as the blockchain itself.
Neal Mitra is CEO of AKJc
