Crypto Takes Washington: Political Changes looming

Crypto Takes Washington: Political Changes looming

The evolving political landscape in the US could transform the crypto industry. From Donald Trump’s crypto conversion (Biden soon?) to the FIT21 legislation and power moves within Federal Agencies, discover the key political changes that can influence the global crypto market.

American politics has always been a thrilling spectacle, all the more fascinating because it influences the whole world. Now that crypto is becoming a part of that play, we could see dramatic shifts in cryptocurrency markets.

Indeed, over the past two months, different parts of the US political landscape have made moves that could be considered historic for the crypto space.

➡️ Presidential candidate Donald Trump started accepting donations in crypto and made a series of pro-crypto public statements and promises. The Biden camp held still for a moment, but recently a lot of rumors started to emerge about the Democrats also willing to open up to crypto.

➡️ The House of Representatives passed an extremely important piece of legislation that could finally define which cryptoassets should be considered securities and which ones commodities. And yes, if passed by the Senate, it would clip the wings of the SEC.

➡️ Overall, there’s an impression that anti-crypto politicians are slowly losing their power, be it in Congress or key Federal agencies.

Let’s see what’s happening in US politics crypto-wise.

Trump’s crypto epiphany

Donald Trump, who just five years ago dismissed Bitcoin as a scam, appears to have been orange-pilled 💊, and by none other than David Bailey from Bitcoin Magazine. The CEO of the oldest Bitcoin-focused media outlet is now officially advising the former president.

This explains how Trump (whose crypto knowledge stays arguable) could spot the biggest pain points for the crypto holders. Speaking at the Libertarian National Convention on May 26, Donald Trump declared that he “will ensure that the future of crypto and Bitcoin will be made in the USA”, and “will support the right to self custody to the nation’s 50 million crypto holders“.

One might ask, why did he even bother attending the convention of another party? It appears that Mr Trump had another card up his sleeve, promising to commute the life jail sentence of Ross Ulbricht, Bitcoin pioneer and the founder of the darknet marketplace Silk Road. The Ross Ulbricht case is dear to many libertarians, and even if Trump was booed throughout most of his speech, this part was met with applause.

The eccentric ex-president did not forget the business either. On June 11, he met with Nasdaq-listed bitcoin mining firms CleanSpark Inc. and Riot Platforms. Summing up this meeting in a post on the social media platform Truth Social, he wrote: “Bitcoin mining may be our last line of defense against a CBDC. Biden’s hatred of Bitcoin only helps China, Russia, and the Radical Communist Left. We want all the remaining Bitcoin to be MADE IN THE USA!!! It will help us be ENERGY DOMINANT.”

Will Biden follow suit?

Trump seems to bet heavily on crypto now, and he doesn’t hesitate to reiterate that President Biden “doesn’t even know” what crypto is. In this situation, The Biden camp has two choices: either assume the anti-crypto stance and continue to vilify the sector, or turn to crypto and refute Trump’s accusations. Judging by the rumors leaking from various news outlets, the acting President might have chosen the latter.

Earlier in June, The Block reported the Biden campaign is holding discussions about accepting bitcoin and crypto donations through Coinbase (citing anonymous sources).

Last week, an email leaked from California congressman Ro Khanna’s office revealed officials from the Biden administration and the Congress, along with the crypto-friendly billionaire Mark Cuban, are due to meet in early July for “the most significant meeting between policymakers and innovation leaders in blockchain to date.”

Another crypto personality and a Biden supporter Anthony Scaramucci (managing partner at hedge fund SkyBridge Capital) is adding to the sentiment, recently claiming that Biden’s anti-crypto position won’t continue into the second term. He added, “I also think that the anti-crypto nonsense which is really sponsored by Senator Elizabeth Warren and Gary Gensler is behind us.” 

The upcoming presidential debate scheduled for June 27th will show if President Biden has indeed taken the crypto topic seriously.

Legislative progress: FIT21

On Capitol Hill, things are heating up as well. The House of Representatives recently passed the Financial Innovation and Technology for the 21st Century Act (FIT21), a bill that could be a game-changer for crypto regulation. And it wasn’t just a Republican victory—71 Democrats joined 208 Republicans in a rare show of bipartisan support. If the Senate gets on board, we might finally see a clear framework distinguishing cryptoassets as either securities (to be regulated by the SEC) or commodities (CFTC).

FIT21’s key principle is to classify cryptoassets based on the decentralization of their networks. Decentralized projects’ tokens would be commodities, while centralized ones would be securities. The bill also allows for accommodating cryptoassets’ changing nature. A coin issued on a new, not yet sufficiently decentralized blockchain, can be considered a security at first, but as the blockchain matures and decentralizes, it could become a commodity.

SEC will remain the judge of decentralization, but with clear guidelines and the possibility to openly dispute its decisions, it would be easier for crypto firms to stand their ground.

Why is FIT21 such a big deal? Currently, the SEC asserts authority over all cryptoassets and frequently sues crypto companies for issuing or trading “unregistered securities.” This heavy-handed approach is seen as one of the most effective ways to stifle innovation and hinder the growth of the crypto industry in the US. Yet, Gary Gensler remains stubbornly committed to this crusade, still attacking crypto sector’s big names, such as Uniswap, Consensys, ShapeShift, and TradeStation.

The Big Picture

The shifting political attitude toward crypto in the US is palpable.

Already, it seems like the biggest crypto haters are being slowly sidelined. Last month, FDIC Chairman and a known confidant of Senator Elizabeth Warren Martin Gruenberg announced his resignation. The reason is not crypto-related (sexual harassment and discrimination culture within the agency), but the consequences could have an impact on the crypto sector. Under Gruenberg’s leadership, the FDIC took a hard line against crypto during last year’s banking crisis, notably accusing Signature Bank of over-reliance on crypto industry deposits. He is also accused by Castle Island Ventures co-founder Nic Carter to be one of the major architects of the so-called “Operation Choke Point 2.0” – a series of actions by the US government aimed at crippling the crypto industry by cutting its access to banking.

Does this mean anti-crypto politicians are ready to bow out? Not at all. However, their influence within the Biden Administration might be slowly waning. If Trump’s pro-crypto rhetoric gains traction and starts to threaten his adversaries, we could witness a virtuous cycle of increasing crypto-friendliness among the nation’s top politicians.

As the elections approach, we can expect more twists and turns in this high-stakes drama. One thing’s for sure: the crypto conversation in Washington is just getting started.