How 2024 became a crypto election
The article explored how cryptocurrencies have unexpectedly influenced politics, especially as they haven’t replaced conventional money. Their complex nature has attracted speculative investment and political backing, predominantly from Republicans. The Biden-Harris administration seeks to regulate cryptocurrency like securities, but the GOP platform resists this, promising to support and boost the cryptocurrency industry.
How crypto became an election issue again in 2024
Several crypto Super PACs are shaking up down-ticket races. That’s getting Washington’s attention.
Last week, Donald Trump spoke in front of the world’s biggest Bitcoin conference in Nashville. The Republican presidential nominee, who has for months positioned himself as the “crypto candidate,” reportedly raised $21 million at the event; just days after the conference he began selling a limited run of $500 high-top sneakers that read “Trump Crypto President” on their sides.
Meanwhile, the presumptive Democratic nominee, Kamala Harris, is reportedly meeting with crypto giants Ripple, Coinbase, and Circle. Though Harris hasn’t made any formal statements about how her administration would address crypto, between the exchange meetings and conversations with crypto enthusiast Mark Cuban, it’s clear she is considering a more open stance than the Biden administration.
The fact that both candidates are vying for the crypto vote suggests that even though Bitcoin and other cryptos are far from their all-time high, the industry as a whole still yields significant influence—and shows, yet again, just how quickly the alternative currency’s political fortunes can change.
Despite all of the attention, the crypto world is still a small part (numerically) of the voting public. The Federal Reserve says only 7% of adults held or used crypto last year, down 3 percentage points from 2022 and down 5 percentage points from 2021. But the industry has withstood several scandals and spent tens of millions of dollars over the past several years to gain legitimacy. There are also several crypto Super PACs that are shaking up down-ticket races for crypto skeptics. That’s getting Washington’s attention.
Despite some well-publicized hiccups, the crypto sector has a total global market cap of $2.24 trillion, which is higher than the market cap of all but 10 countries in the world. Like it or hate it, crypto has grown to a point where politicians can’t ignore it.
“The crypto crowd is willing to vote and pay for regime change in Washington,” says James Angel, a faculty affiliate at Georgetown McDonough’s Psaros Center for Financial Markets and Policy.
THE POLITICS OF CRYPTO
Globally, cryptocurrency accounted for about 0.4% of the entire energy consumption in the world in 2022, according to an International Energy Agency report released in January. That’s about the same amount as the Netherlands consumed. The carbon footprint of Bitcoin miners alone from 2020-2021 was equivalent to burning 84 billion pounds of coal or operating 190 natural gas-fired power plants, according to the United Nations. That puts Trump and Harris in a potentially uncomfortable spot, where they’ll ultimately have to weigh negative climate impacts against the advantages of embracing crypto.
In late January, the Biden Administration announced measures meant to address the energy consumption of the crypto world, with the U.S. Energy Information Administration (EIA) launching a survey of electricity consumption by mining companies. Those companies will be required to offer a detailed look at their energy use. But a lot of work remains to be done by whoever next occupies the White House.
Crypto has also become a more valid financial asset in the past year. With the SEC’s blessing for finance firms to offer exchange-traded funds (ETFs), which track Bitcoin’s price, investors who have avoided the assets previously now feel a greater sense of safety. It’s also now much easier to invest in Bitcoin and crypto, as people can use the advisors they’ve trusted for years, versus startups and crypto companies that are still trying to step out of the shadow of FTX.
THE CRYPTO CANDIDATES
Part of the reason Trump has found so many backers is due to his vow to create a strategic national Bitcoin reserve if elected. Doing so would take a significant amount of crypto out of the market, which would likely cause a surge in price. Bitcoin enthusiasts who support Trump are betting that his election will make them notably richer.
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They’re also counting on Trump to oust SEC head Gary Gensler, who has often acted as a roadblock for cryptocurrencies. Trump, at his speech on Saturday, promised under a second term “The rules will be written by people who love your industry, not hate your industry.”
That’s making industry leaders feel heard, after a long history of feeling second-class to other financial markets. The question now, though, is how Harris will respond.
One crypto lobbying group, The Digital Chamber, is already urging her to mirror that feeling of inclusivity and foster an “open dialogue” with industry leaders, as well as include pro-crypto language in the Democratic platform.
“Both Democrats and Republicans now realize that we need reasonable regulation that allows us to innovate with this technology while still protecting investors,” says Angel.
Harris, he says, has the opportunity to distance herself from Gensler’s approach, which has won the party no fans in the crypto community. “She needs to push for a regulatory regime that allows the simple registration and trading of assets in crypto wrappers,” he says.
Angel says Trump might have an edge, though, as he seems to have latched on to three key factors.
“Crypto appeals to people who distrust government institutions, just like MAGA people,” he says. “The high price of crypto assets [also] means that crypto people have a lot of money to donate to his campaign.”
I didn’t anticipate the political twists and turns of the past few weeks, but then, who did? One thing I do blame myself for not seeing coming, however, is the extent to which this has become a crypto election.
Six years ago, I argued that bitcoin and other cryptocurrencies served no useful purpose, that their market value rested on nothing but “technobabble and libertarian derp.” I stand by that judgment, which has actually been reinforced by the passage of time.
But I didn’t foresee how big a deal crypto would nonetheless become — not because it would fulfill its promise of replacing conventional money, which it hasn’t and never will, but because it has become a powerful force that is, among other things, warping our politics.
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What is crypto? Donald Trump recently said, “Most people have no idea what the hell it is.” Indeed. Even now, it’s hard to explain exactly what bitcoin and other crypto assets really are.
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But maybe this will help: Who guarantees that the money in my bank account belongs to me? Why can’t the bank tell me, “Sorry, we used that money to pay other people”? The answer is that doing so would be illegal.
What bitcoin and its emulators try to do is sidestep the need for a legal framework with a technological fix that doesn’t depend on banks’ centralized record-keeping. You “own” a bitcoin if you have access to a code that effectively turns a seemingly meaningless string of ones and zeros into a message that says, in effect, “I am a bitcoin,” in much the same way that numerical keys can unlock encrypted communications.
These keys are generated by “mining,” which means using banks of computer servers to solve extremely complex computational problems (a process that is costly and consumes huge amounts of electricity, generating lots of greenhouse gases).
It is, I’m told, a very clever system. But what problem does it solve that can’t be handled more easily and cheaply in other ways? I’ve been in many meetings over the years in which skeptics have asked crypto advocates that question and have never heard a clear answer.
And crypto has never shown any signs of supplanting conventional money. In the years since bitcoin was introduced, digital payment systems that skip the hocus-pocus, like Venmo and Apple Pay, have become ubiquitous. But for most of us, crypto assets have few uses other than the purchase of other crypto assets; notable exceptions are money laundering, extortion and scams.
El Salvador delighted the crypto faithful in 2021 when it made bitcoin legal tender, but three years later the cryptocurrency is barely used in commerce.
Still, isn’t a claim that crypto is basically useless refuted by the fact that crypto assets are now worth more than $2 trillion? No. This wouldn’t be the first time — or the hundredth! — that fast-talking operators with a good story line have persuaded investors to pay large sums for ultimately worthless assets.
If anything, what’s surprising is crypto’s durability, the way bitcoin and its emulators have managed to come back from repeated market crashes and scandals.
My guess is that crypto’s robustness has a lot to do, perversely, with its incomprehensibility: It’s hard to conclude that someone was misleading you when you never understood what was being said in the first place. Also, crypto isn’t like a company with a well-defined bottom line: “Hey, this company is still losing money” is easier to understand than “Hey, these so-called currencies still aren’t being used for everyday transactions.”
Finally, crypto has been heavily marketed to small investors — remember those Super Bowl ads? — who normally wouldn’t and shouldn’t be buying highly speculative assets.
But what does this have to do with politics? Support for crypto doesn’t break down along purely partisan lines; some Democrats still have positive things to say about the technology. But the Biden-Harris administration has in general advocated regulating crypto assets the same way we regulate other securities, like stocks, and regulating crypto institutions that are effectively banks the same way we regulate conventional banks.
And the crypto industry has reacted in much the same way as fossil fuel industries after Democrats began to take environmental concerns seriously: by throwing their support overwhelmingly behind Republicans. They seem to be getting results: The 2024 GOP platform says, “Republicans will end Democrats’ unlawful and un-American Crypto crackdown” — by which they mean, stop regulators from treating crypto assets and institutions the same way they treat stocks and banks. Trump has promised to turn America into a “bitcoin superpower,” which apparently means having the government buy a lot of bitcoin.
All of which raises the disturbing prospect that an industry initially driven, seemingly, by libertarian instincts but which has never delivered on its economic promises will nonetheless be able to buy itself a huge government bailout.
This article originally appeared in The New York Times.