Donald Trump may be crypto’s unexpected savior

The cryptocurrency industry has spent the Biden era in a losing battle with Washington. If Republicans take power in 2024, it can still win the war.

Donald Trump derided crypto during his presidency, but if he returns to the White House he is expected to usher in policy and personnel that would be more aligned with digital asset firms. GOP lawmakers and conservative groups have drafted regulatory proposals in line with the industry’s wish list, and Republicans are already floating the names of potential regulators who would play a key role in turning the tide.

It would mark a major shift from President Joe Biden, whose administration and regulators are consistently taking a skeptical approach to crypto over what they see as risks to consumers and the broader financial system. Leading Democrats in Congress, including Senate Banking Chair Sherrod Brown of Ohio and Sen. Elizabeth Warren of Massachusetts, are likewise ramping up scrutiny. The crypto lobby in response is fighting back hard against policies designed to rein in the industry, including in court.

“If the second Trump administration takes place, [the] president will be a lot more friendly to the crypto industry,” said House Majority Whip Tom Emmer (R-Minn.), who endorsed Trump this month and is one of Capitol Hill’s leading crypto proponents.

The potential swing in Washington’s crypto posture illustrates how policy concerns around bitcoin and other digital assets have taken on an increasingly partisan tinge in the last few years as the $1.7 trillion market experienced a dramatic boom and bust. It means 2024 is likely the most consequential U.S. election in the industry’s history — one that will determine the extent to which the federal government grants it legitimacy and a rulebook that will support its growth.

While crypto advocates see an opening, critics are warning of the possible consequences.

“The only reasonable expectation is that Trump will bring his overall financial deregulation mindset to the crypto arena,” said Dennis Kelleher, president and CEO of the financial watchdog group Better Markets. “It's going to be to the extreme disadvantage of investors and customers — and ultimately, in our view, for financial stability."

Trump would be an unlikely crypto champion. He disparaged digital assets during his presidency, and key officials in his administration were skeptical of the industry.

“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” Trump wrote on Twitter in 2019.

But since leaving office, he has invested in crypto and issued his own non-fungible token, or NFT. More importantly, key Republican officials on Capitol Hill have rallied around crypto and pushed for industry-friendly regulations.

“The people that [Trump] would put in regulatory roles are much more likely to at least be crypto-open, if not overtly crypto-friendly, than this administration,” said Brian Brooks, a veteran crypto executive and a former top bank regulator under Trump.

Crypto has gained steam on the right in recent years, thanks in part to privacy concerns. Republican presidential candidates including Vivek Ramaswamy and Florida Gov. Ron DeSantis have touted pro-crypto policies on the campaign trail and rejected the concept of a central bank digital currency as government overreach. Trump is backing an Ohio Senate candidate, Bernie Moreno, who made a name for himself in part by championing Cleveland as a hub for crypto-related technology.

A recent poll by the Crypto Council for Innovation trade group showed that 51 percent of crypto owners would vote for Trump, versus 41 percent for Biden. House Republicans’ campaign arm accepts donations in crypto via a payment-processing partnership with Coinbase, the largest U.S. digital asset exchange and a major player in the Washington crypto lobby.

“At the moment, in the populist movement on the right, there’s more fear about the Fed manipulating monetary policy, there’s more fear about central bank digital currencies, which would tend to drive you in a crypto-friendly direction,” said Brooks, who served as chief legal officer at Coinbase before becoming acting Comptroller of the Currency under Trump.

If crypto regulation is viewed as a partisan or ideological issue, it could present risks for the industry as it tries to appeal to lawmakers on both sides of the aisle. Crypto advocates say their cause remains nonpartisan.

An industry-backed super PAC network that has raised more than $74 million to influence the 2024 elections plans to support Democrats and Republicans. On Capitol Hill, some Senate Republicans have supported stricter oversight of crypto trading, in part because of concerns about digital currency's use in financial crime. A handful of House Democrats have voted in favor of pro-crypto legislation in the past year.

“I don’t think it’s gotten more partisan,” said Ron Hammond, director of government relations at the Blockchain Association, a top industry lobbying group. He said he isn’t taking it for granted that a second Trump administration would be kinder to crypto firms, given national security concerns from some GOP defense hawks.

Sen. Bill Hagerty (R-Tenn.), who was Trump’s ambassador to Japan and now serves on the Senate Banking Committee, is among those calling for a lighter regulatory touch, though he said in an interview that he “started out as a crypto skeptic” himself.

Hagerty expects Trump to bring in “people that are receptive to innovation happening here on American soil, rather than pushing it offshore, and the liberty and freedom that crypto brings about.”

The Trump campaign did not respond to requests for comment for this story.

“The general thrust of Republican opinion on this is, we should have proper consumer protections without destroying a very nascent industry,” said Sen. J.D. Vance (R-Ohio), a vocal Trump ally who also serves on Senate Banking.

The top target for the crypto industry and its allies in a Republican administration would likely be the Securities and Exchange Commission, the arm of the government that has had the most heated conflict with crypto players over the last several years. The SEC under Trump and now Biden has pursued a series of enforcement actions against crypto firms that it says are subject to federal securities laws. The industry is fighting back in court.

Republicans who want pro-crypto appointees are floating names for the next GOP SEC chair, including Brooks, SEC Commissioner Hester Peirce and former SEC Division of Investment Management director Dalia Blass. Brooks declined to comment. Blass and Peirce didn't respond to requests for comment. Peirce has said she would not seek renominationwhen her term is up in 2025.

Brooks has been a crypto proponent and served as an executive at digital asset firms, including Coinbase and Binance.US, which are both being sued by the SEC. Peirce, who was nominated to the SEC by Trump in 2017, has frequently criticized the agency’s approach to crypto regulation under Chair Gary Gensler. Blass has also criticized Gensler’s rulemaking agenda and crypto enforcement.

“You have talented folks that could chair the SEC and the CFTC,” said House Financial Services Chair Patrick McHenry (R-N.C.), who has drafted a sweeping regulatory revamp that would set up a new regulatory pathway for crypto. He pointed to Blass, Peirce and Brooks as potential Gensler successors.

Rep. Bill Huizenga of Michigan, a senior Republican on House Financial Services, said in an interview that he would encourage Trump to nominate an SEC chair who “is interested in letting an emerging market like that properly flourish.”

A presidential transition road map organized by the Heritage Foundation calls for the SEC and its sister agency, the Commodity Futures Trading Commission, to issue a joint rule defining when a digital asset will be treated as a security or a commodity — a move that could help some in the industry escape the SEC’s enforcement crackdown.

"The president himself is inclined towards aspects of freedom, but an organized finance system," McHenry said. "So I think there’s an opportunity … But I don’t think he has views written in stone on crypto."