Upcoming US Election to Shape Future of Crypto Regulation
The US political landscape has reshaped itself dramatically in the last few weeks, potentially giving a peek at the contours of a new era for crypto policy and regulation in this country. According to dYdX, President Joseph R. Biden, who has presided over a surprisingly hostile administration in regard to crypto, has decided not to seek the Democratic party’s nomination for President. Instead, he has endorsed his Vice President, Kamala Harris, for the position.
The Short Term: Uncertainty on Complex Policy in a Turbulent Time
Election years, especially presidential election years, are historically tough times to get complicated legislation over the finish line in Congress. Members frequently return to their home states and districts to stay in touch with constituents, and their records are scrutinized by voters and special interest groups. This makes nuanced, bipartisan votes rarer, as they are hard to explain in a soundbite that could impact a reelection campaign.
With an issue like crypto, even if it isn’t as politically dangerous as topics like immigration or healthcare, the legislation itself is complex and requires significant staff time to navigate. The Senate Agriculture Committee, led by a retiring Debbie Stabenow, has been struggling to gain support for a new market structure bill focused on digital commodities. This bill aims to provide a clear regulatory framework for digital commodities, which is needed in the evolving crypto space. However, with the current political climate, gaining attention for such a nuanced bill is challenging.
The role of regulatory agencies also adds to the uncertainty. The Securities Exchange Commission (SEC), under Gary Gensler, has taken a hard line on crypto, focusing on regulation through enforcement. This approach has created uncertainty and hindered innovation within the industry. Gensler's stance is unlikely to change in the short term, regardless of who wins the presidency. However, a new administration could influence the overall direction of the SEC and other regulatory bodies, potentially leading to a more balanced approach to crypto regulation.
The Medium Term: Hope for A More Open-Minded Executive
Biden’s choice not to accept the Democratic nomination means that his administration's often hostile stance toward crypto is on the way out. This doesn’t tell us exactly how the executive will see the industry next year, but it will likely be different.
Former President Trump has been working hard to court the crypto industry and crypto-focused voters over the last several months, with his biggest moment yet coming as he addresses the Bitcoin community in Nashville. He has been vocal about his support but has yet to articulate clear policy objectives that indicate a deep understanding of the technology and the ecosystem.
In contrast, Kamala Harris does not have a significant record regarding crypto and will not be addressing the community in Nashville, despite being invited. Her relatively young age makes her more likely to be open-minded toward blockchain technology than the current president. Crypto is developing into more of a generational issue than a strictly partisan one. The average age of the 71 Democrats who voted for the passage of the FIT21 bill in the House in May is a decade younger than those who voted against it. However, age alone does not guarantee anything, and some personnel from the Biden administration could carry over.
The Long Term: Generational Change
The long-term outlook for crypto regulation revolves around Congress's ability to draft and pass legislation that will enable crypto and DeFi to thrive in the United States. Despite falling short of passing meaningful legislation this year, there has been progress that gives hope regardless of which candidate takes office next year. Trump has indicated support, and the Democrats have started to moderate their stance.
Voters are already making their voices heard by moving pro-crypto and open-minded candidates forward in primary races across the country. As Congress transitions to a new generation, things are likely to move in favor of crypto. The evolving US political landscape presents both challenges and opportunities for the future of crypto regulation. As the Biden administration steps back, the potential for a shift in policy under new leadership, whether from Harris or Trump, brings cautious optimism. The immediate legislative hurdles and regulatory uncertainties persist, but growing generational support for crypto and evolving bipartisan engagement indicate a promising future. The key to long-term success will be Congress's ability to craft and pass legislation that fosters innovation while providing clear regulatory guidance, ensuring the US remains a leader in the rapidly advancing world of blockchain and digital assets.