In the heat of an election year, support for business interests is typically seen as a positive move. However, when that business is cryptocurrency, the implications become far more complex. Despite the recent exposure of one of the industry’s biggest political donors as a criminal, the temptation of campaign donations from the digital-money sector is proving hard to resist for some candidates.
Just two years ago, Sam Bankman-Fried, a prominent figure in the crypto world, poured substantial funds into political campaigns in hopes of securing laxer regulations. His efforts ended in disgrace, with Bankman-Fried facing federal prison on fraud charges. Yet, the cycle seems to be repeating itself, as crypto advocates now rally millions to challenge politicians who oppose their interests.
This influx of funds has led some candidates to abandon common sense in pursuit of financial backing. While the crypto industry is adept at generating headlines, the stakes may not be as high as they appear. Even the most skeptical U.S. politicians are not proposing to ban Bitcoin and other cryptocurrencies, a move that China and about 20 other countries have already taken. Instead, the debate largely revolves around whether digital tokens should be regulated like other investment products—a stance that many believe is necessary.
The Biden administration has taken significant steps to mitigate the risks posed by crypto, including legal actions against several companies and individuals, among them Sam Bankman-Fried, for violations of money-laundering requirements and securities laws. Vice President Kamala Harris has yet to clarify whether her approach would differ from Biden’s, but recent indications suggest she may be leaning towards a more lenient stance. This week, a policy adviser hinted at her willingness to support the industry.
On the other hand, former President Donald Trump has gone even further in his bid to win over the crypto crowd. Speaking at the Bitcoin 2024 conference in July, Trump made a series of bold promises. These included appointing a council of “people who love your industry” to craft crypto regulations, firing the Securities and Exchange Commission Chairman Gary Gensler—a known skeptic of the industry—banning the Federal Reserve from creating its own digital currency, establishing a strategic Bitcoin stockpile, and commuting the prison sentence of Ross Ulbricht, who was convicted in 2015 for creating a crypto marketplace for illegal goods.
Independent candidate Robert F. Kennedy Jr. has also thrown his hat into the ring, calling Bitcoin “the currency of hope” and pledging to direct the U.S. Treasury to invest hundreds of billions in crypto. Such proposals, however, seem hard to reconcile with the broader national interest. In the 15 years since Bitcoin’s inception, digital tokens have largely failed to prove their practical value. Only about 1 percent of Americans reported using them for payments or money transfers last year. More often, cryptocurrencies are utilized to move money outside government oversight, a practice that benefits criminals, terrorists, and individuals under sanctions—hardly the groups a presidential candidate should be courting.
Instead of encouraging the public to shift their savings into digital wallets rather than stocks, bonds, and other assets that support the real economy, candidates should focus on working with Congress and regulators to ensure that the rules applied to cryptocurrencies are consistent with existing laws on fraud, money laundering, and sanctions enforcement. If the technology is as innovative and beneficial as its proponents claim, it should be able to thrive within these parameters. No amount of campaign contributions should persuade candidates to think otherwise.
