In the age-old tale of the emperor and his invisible suit, the sovereign parades through the streets, confident in his attire, only to be exposed as completely naked. Today, the story finds a modern parallel in the cryptocurrency industry’s growing influence in U.S. campaign finance.
Fifteen years ago, Bitcoin was introduced with the promise of revolutionizing the financial system. Yet, despite the hype, its practical uses have remained limited, often associated with illegal activities. The industry has been plagued by thefts, scams, and controversies. Still, cryptocurrencies have succeeded in one area: marketing themselves as the future of money.
With a market value of around $2 trillion, cryptocurrencies have become significant players in the current U.S. election cycle. Surprisingly, this industry, which contributes little to employment or productive output, is responsible for nearly half of corporate spending on political action committees (PACs) this cycle.
Crypto’s political spending is distinct. While it leans towards Republican candidates, the industry’s super PACs do not target Democrats broadly. Instead, they focus on politicians who have called for increased scrutiny of the crypto sector, including its financial risks and marketing strategies. This targeted approach has not gone unnoticed by politicians.
In 2021, former President Donald Trump dismissed Bitcoin as a “scam.” However, by July 2024, he had changed his tune, vowing to transform America into a “Bitcoin superpower” and labeling crypto skeptics as “left-wing fascists.” The Biden administration has taken steps towards regulating cryptocurrencies, but Democratic Senate Majority Leader Chuck Schumer has openly expressed support for the industry, reportedly seeking backing from crypto players for Vice President Kamala Harris’s campaign.
The sheer scale of crypto’s political spending, particularly from an industry that arguably destroys more value than it creates—especially considering its environmental impact—is startling. However, in a way, it makes sense.
Think back to the emperor’s tailors. If they had simply dressed him in an unattractive suit, they would have faced criticism for their poor fashion choices. But when they fooled him into wearing nothing at all, any challenge to their deception had to be met with far greater resistance. Similarly, the crypto industry’s aggressive political spending reflects an underlying desperation to protect its precarious position.
Almost every major industry spends money to influence policy in its favor. The fossil fuel industry, for example, has long funded efforts to undermine environmental regulations. However, critics of the oil industry are unlikely to cause its sudden collapse; after all, it produces a product with real-world utility. In contrast, the crypto industry is built on little more than the belief that its products will eventually find legitimate uses.
Some argue that blockchain, the technology underlying cryptocurrency, has real business applications. But these claims are far removed from the grand promises made by Bitcoin and its rivals.
As for the future of crypto, much remains uncertain. If the U.S. government decides to regulate the industry seriously, the entire $2 trillion valuation could vanish overnight. This reality likely fuels the crypto sector’s massive political spending—an attempt to project strength while inadvertently revealing the vulnerability beneath the surface.
In the end, the emperor’s new clothes are nothing but an illusion.
