Despite the ongoing turmoil in the cryptocurrency world, marked by bankruptcies, legal troubles, and a general decline in popularity, politicians from both major parties in the United States are increasingly embracing digital assets. This shift has raised questions about the motives behind such endorsements, especially given the prevailing negative sentiment towards cryptocurrencies among the general public.
Political Endorsements Amid Crypto Chaos
Over the past year, the cryptocurrency sector has faced numerous setbacks, including high-profile bankruptcies and legal battles involving former industry leaders. Nevertheless, political support for digital assets has seen a surprising uptick. Politicians, both seasoned and newcomers, are now vocal supporters of cryptocurrencies, driven by special interests and a skewed perception of voter attitudes towards digital assets.
Long-standing and New Crypto Advocates
Several Democrats and Republicans have been long-time advocates of cryptocurrencies. Representative Ro Khanna (D-Fremont) recently joined 13 Democratic colleagues in urging the Democratic National Committee to adopt a progressive stance on digital assets and blockchain technology. Their letter to the DNC suggested, albeit implausibly, that these technologies would significantly impact electoral victories.
Meanwhile, some politicians have had a change of heart regarding crypto. Eric Hovde of Wisconsin, who previously criticized the crypto market as “insanity,” has now become a proponent. He recently expressed support for decentralized finance and Bitcoin, earning a “Very Pro-Crypto” designation from the industry lobbying group Stand with Crypto.
Trump’s Crypto U-turn
Perhaps the most notable transformation is that of Donald Trump. Once a vocal critic of cryptocurrencies, calling Bitcoin a “scam” in 2021, Trump recently delivered a keynote address at the Bitcoin 2024 conference in Nashville. He pledged to fire SEC Chair Gary Gensler and to commute the life sentence of Ross Ulbricht, the creator of the Silk Road crypto site. Trump also proposed creating a national strategic reserve of Bitcoin, a concept criticized by many economists.
Kamala Harris’ Cautious Approach
Even Vice President Kamala Harris’ campaign has shown a tentative interest in mending relations with the crypto sector. Harris’ aides have reached out to leading crypto firms, seeking a “reset” of relations, possibly to mitigate the damage caused by Gensler’s anti-crypto stance and the overall lack of enthusiasm for digital assets in the Biden administration.
The Influence of Crypto Lobbying
The growing political support for cryptocurrencies can be attributed to a well-funded lobbying campaign by crypto advocates. This campaign has two primary components: substantial financial contributions to political campaigns and the propagation of misleading narratives about the prevalence of crypto ownership among voters.
Crypto advocates claim that 52 million adult Americans are crypto owners, a figure derived from a Coinbase-commissioned poll. However, this number is widely disputed, with the Federal Reserve estimating that only 7% of adults had bought or held crypto in 2023, translating to about 18 million people. Furthermore, only 1% of adults used crypto for transactions in 2023, highlighting the limited real-world application of digital assets.
Public Sentiment and Crypto’s Dark Side
Despite the political enthusiasm, public sentiment towards cryptocurrencies remains largely negative. Surveys indicate that a significant majority of voters in key swing states view crypto unfavorably. This negative perception is rooted in the association of cryptocurrencies with criminal activities, such as ransomware attacks and illegal trade.
Molly White, a well-known chronicler of financial technology, suggests that even among crypto holders, few prioritize it as a political issue. Many are more concerned with other pressing issues such as climate change, gun rights, and reproductive rights.
The Financial Muscle of Crypto Advocates
The crypto industry has significant financial resources at its disposal. The leading crypto campaign fund, Fairshake, reported $203 million in contributions as of June 30. This fund has been actively supporting pro-crypto candidates and opposing critics of digital assets.
Notably, Fairshake has supported politicians like Rep. Patrick McHenry (R-N.C.), who has advocated for regulatory changes favorable to the crypto industry. However, this financial support comes predominantly from major crypto firms and investors, rather than grassroots fundraising.
The Need for Vigilance
The surge in political support for cryptocurrencies raises concerns about the influence of special interests in shaping policy. While the crypto industry is not essential for American economic development, its proponents are pushing for regulatory changes that could benefit them at the expense of ordinary Americans. It is crucial to remain vigilant and ensure that the interests of the public are safeguarded against the financial ambitions of the crypto sector.
