In March, I spoke with an influential former regulator in Washington, D.C., about the influx of crypto money pouring into the presidential election. The change in the industry’s standing was stunning. A few months had passed since Sam Bankman-Fried’s conviction, which marked the end of a “crypto winter.” Since then, crypto retrenched, hired better lobbyists, and became more sophisticated. A super-PAC funded by Andreessen Horowitz and Coinbase spent $10 million to defeat Katie Porter in her Senate race. This former regulator warned, “Money doesn’t buy experience. Experience does, and they’ve gotten a lot more experience. It’s not just huge checks to be a shill anymore. Now it’s ‘We’re assembling a list of reasonable targets.’”
Harris and the Crypto Industry: A New Dawn?
Since Kamala Harris became the presumptive Democratic nominee for president, the digital-asset world has gained popularity in Washington. Bitcoin is worth roughly $70,000, near all-time highs. Even Trump, a former crypto skeptic, now loves it, telling a Nashville crowd, “It’s going to the moon. I want America to lead the way.” He also promised to fire Gary Gensler, the SEC chair antagonizing the industry.
- Surprising Moves: Harris has reportedly had aides meet with industry officials seeking to “reset” relations with some of the world’s biggest crypto exchanges.
- Unclear Discussions: It’s unclear what has been discussed between the Harris campaign and the industry, but crypto companies have long demanded clearer rules specifically for digital tokens, rather than the same onerous rules for Wall Street.
Crypto’s Evolution: From Bust to Boom
Crypto is a boom-and-bust industry. After the most recent bust, starting in late 2021 and culminating in FTX’s collapse, the villains of the previous cycle have either receded from view or been called out by regulators and courts.
- Sober Money Managers: The anything-goes atmosphere of the pandemic-era boom has been replaced with sober money managers like BlackRock and Franklin Templeton, making bitcoin and ethereum available for the typical 401(k).
- Market Recovery: The market has climbed back to about $2.5 trillion in value, up from under $1 trillion following FTX’s implosion.
Democratic Support and Skepticism
Plenty of Democrats, including influential representatives like Ritchie Torres and Ro Khanna, have become vocal supporters of crypto. However, some powerful Democrats remain skeptical, including Elizabeth Warren and Senate Banking Committee chair Sherrod Brown.
- No Outward Promises: Harris has made no outward promises to the industry. The Biden administration’s stance has been to regulate digital-asset companies like traditional Wall Street firms.
- Industry Perspective: The crypto industry sees positive developments, like the approval of bitcoin exchange-traded funds, as positions they were forced into by the courts.
Harris’s Background: A Mixed Signal for Crypto?
Harris’s record as a former prosecutor might not endear her to crypto die-hards. Crypto has been used to facilitate drug and sex trafficking and to launder money for countries like North Korea.
- Skepticism from Former Regulators: John Reed Stark, a former head of enforcement at the SEC, said, “It’s a prosecutor’s nightmare. Bitcoin is a killer app for criminals.”
- Government Reports: Stark’s view is supported by various government reports on the misuse of crypto.
Crypto’s Financial Clout in Elections
In previous election cycles, crypto’s financial influence hasn’t always yielded positive results. SBF, for instance, spent more than $50 million supporting losing candidates in 2022, before his companies collapsed and his name became associated with fraud.
- Minting Money: Despite past failures, the ability to mint money remains crypto’s big advantage. Harris’s campaign, though in its early days and lacking a running mate, may be reaching out to the crypto industry to narrow the gap with Trump.
The Future of Crypto Under Harris
Harris’s campaign is still defining its policy positions. While some speculate she might come out in a big way for crypto, promising the industry everything it has ever wanted, others believe it’s more about reducing the daylight between her and Trump on this issue.
- Political Strategy: Harris might be reaching out to crypto to give die-hard crypto enthusiasts less reason to vote against her, rather than making a genuine play for their votes.
- Balancing Act: This delicate balancing act will be critical as Harris navigates her campaign, considering her background and the evolving landscape of the crypto industry.
