Will the US presidential election define the future of crypto?

The upcoming US presidential election is poised to have significant implications for the future of cryptocurrencies. Gary Gensler, the chair of the Securities and Exchange Commission (SEC), has expressed strong concerns regarding the cryptocurrency industry, labeling it as 'rife with fraud and hucksters. ' He emphasizes that many cryptocurrency firms are not adhering to the regulations that his agency enforces, resulting in substantial financial losses for investors worldwide. As the election approaches, the cryptocurrency sector is investing millions of dollars in political donations, aiming to sway the election results in their favor to secure more favorable regulations in the future. The election features a contest between Donald Trump and Kamala Harris, alongside all 435 House of Representatives seats and 33 Senate seats up for grabs. The future of cryptocurrency has become a contentious issue, with clear distinctions between Trump’s and the Biden administration’s approaches. Trump has actively sought the support of cryptocurrency enthusiasts by pledging to transform America into 'the crypto capital of the planet' and proposing the establishment of a 'strategic national bitcoin stockpile,' akin to the US government's gold reserves. Recently, he launched a new venture called World Liberty Financial, indicating his belief that 'crypto is one of those things we have to do. ' This marks a significant shift from his previous stance three years ago when he dismissed Bitcoin as a 'scam' and a threat to the US dollar. In stark contrast, the Biden administration, with Harris as vice president, has implemented a rigorous crackdown on cryptocurrency firms. Notably, in March, Sam Bankman-Fried, the founder of FTX, was charged with fraud after misappropriating billions of dollars from customers globally, many of whom are still struggling to recover their funds. Additionally, in April, Changpeng Zhao, the founder of Binance, faced legal action and the company was fined $4. 3 billion for allowing illicit activities on its platform, including money laundering by criminals and terrorists. The SEC is also pursuing a case against Binance, contributing to a record 46 enforcement actions taken against cryptocurrency firms last year. Gensler highlights that the cryptocurrency sector cannot evade compliance with established laws simply because they are utilizing new technologies. He asserts that regulations requiring companies to disclose certain information to protect investors have been in place since the SEC's inception in 1934, following the Wall Street crash of 1929 that led to the Great Depression. He warns that while cryptocurrencies represent a small segment of the financial markets, they can undermine the trust that everyday investors have in these markets. Although proponents argue that cryptocurrencies provide a fast, cost-effective, and secure means of transferring funds, a survey conducted by the Federal Reserve revealed a decline in the number of Americans using cryptocurrencies. While Harris has remained relatively quiet on the topic, one of her advisors recently stated that she would support policies that promote the growth of emerging technologies, including cryptocurrencies. Recent discussions between her team and industry leaders aim to foster trust and provide hope for a more favorable future, regardless of the election outcome. Paul Grewal, the chief legal officer at Coinbase, emphasizes the importance of the US market for cryptocurrencies and the technological advancements developed within the country. He notes that the tight race for the White House means that every vote, including those from cryptocurrency supporters, will be crucial. As Trump has been vocal about his pro-crypto stance, Harris's position remains less defined. The regulatory crackdown on cryptocurrencies in the US mirrors similar actions in Europe, where the European Union has also sought to mitigate the risks associated with cryptocurrency use by criminals. However, other regulators have been slower to respond. The G20, a group of major economies, is working on establishing minimum standards for cryptocurrencies, but these standards are not legally binding, leading to slow adoption. In the US, a bill aimed at regulating cryptocurrencies has passed the House but stalled in the Senate, with critics arguing that it offers insufficient consumer protection. Grewal supports the bill, asserting that the industry is not opposed to regulation but seeks equal treatment with other asset classes. As the November elections draw near, the cryptocurrency industry recognizes an opportunity to elect lawmakers who are sympathetic to their interests. By last month, the sector had already spent an unprecedented amount on political donations, according to research by the non-profit organization Public Citizen. Rick Claypool, the research director at Public Citizen, notes that this funding is intended to support pro-crypto candidates and challenge critics, regardless of their political affiliations. The cryptocurrency industry has outspent all others in corporate donations, aiming to influence Congress to reduce oversight and weaken consumer protections.