A month is a long time in politics. As a lacklustre Democratic Presidential campaign has transformed into the Kamala Harris Show, Donald Trump’s reëlection bid has turned into the Crypto Show. After picking J. D. Vance, a former venture capitalist and cryptocurrency booster, as his running mate, Trump appeared at a Bitcoin conference in Nashville, where he promised to create a “strategic bitcoin stockpile” and turn the United States into “the bitcoin superpower of the world.” He also pledged that he would fire Gary Gensler, the chair of the Securities and Exchange Commission, who has criticized the crypto industry for a “record of failures, frauds, and bankruptcies,” and who is the nemesis of many crypto bros.
Of course, it’s richly comedic to see Trump, a technophobe who, in 2019, said that the value of bitcoin was “based on thin air,” now promoting himself as its biggest champion and trying to cash in on it politically and personally. At the Nashville event, according to CNBC, dozens of crypto boosters, including the Winklevoss twins and Kid Rock, paid five hundred thousand dollars apiece to attend a private roundtable with the former President. A few days later, a company that Trump owns listed online a “limited” run of gold sneakers emblazoned with a Bitcoin symbol and the words “TRUMP CRYPTO PRESIDENT.” The high-tops were listed at five hundred dollars per pair. (According to one report, they subsequently appeared on eBay at prices of up to twenty-five hundred dollars, with one listing tagged at $69,999.)
What could be more predictable? In 2022 and 2023, Trump issued a series of N.F.T. trading cards featuring drawings of him in superhero costumes. Earlier this year, the latest edition of cards was pulled from sale after their prices plunged. But, behind the familiar sight of Trump trying to pad his campaign war chest and enrich himself, there is a bigger and more consequential story unfolding. The crypto industry, having suffered a series of legal and regulatory setbacks in recent years, including the conviction and imprisonment of some of its leading figures, is making a determined effort to gain relief from S.E.C. oversight at the same time that it is making inroads into mainstream finance. (Earlier this year, Fidelity, BlackRock, Invesco, and other firms launched exchange-traded funds whose value is tied to the price of bitcoin.) If this industry maneuver succeeds—and it may well do so if Trump wins in November and Republicans sweep Congress—the long-term consequences could be calamitous.
To understand the current situation, it’s necessary to go back a couple of years, when the industry was in crisis. In December, 2022, Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX and a major political donor, was arrested. Subsequently, he was convicted of defrauding FTX customers out of more than $1.7 billion and sentenced to twenty-five years in prison. In November, 2023, Changpeng Zhao, the founder and C.E.O. of Binance, the world’s largest cryptocurrency exchange, pleaded guilty to failing to counter money laundering on the exchange, and was sentenced to four months in prison.
The confirmation that criminality was at the heart of crypto trading was, of course, a big setback for the industry at large. But an even bigger threat came in the form of Gensler and his campaign to treat many crypto assets as investment securities, like stocks or bonds, which would make them subject to strict investor-protection laws and government oversight. The crypto industry had long argued that investing in crypto is more akin to buying commodities, such as precious metals and pork bellies, which are regulated by the Commodity Futures Trading Commission, a much smaller agency than the S.E.C. and one that historically has been less focussed on individual investors.
In September, 2022, Gensler said, in a speech in Washington, that he believed “the vast majority” of crypto tokens were securities, and he quoted Joseph Kennedy, the first head of the agency, who averred, “No honest business need fear the S.E.C.” In the following months, the S.E.C. sued some leading crypto firms, including Binance and Coinbase, the largest U.S. crypto exchange. The agency accused the two companies of operating unregistered securities exchanges, and other violations. The companies denied any wrongdoing and tried to get the cases dismissed before trial. In March of this year, a federal judge in New York ruled against Coinbase and said that most of the case could go ahead. In June, a judge in Washington, D.C., said that most of the Binance case could go ahead, too. Last December, a federal judge in New York said “there was no genuine dispute” that four crypto tokens sold by Terraform Labs, a South Korean crypto company, were securities under U.S. laws.
The S.E.C. has also suffered setbacks on that key issue. In July, 2023, a federal court in California ruled that XRP, a token created by the San Francisco-based crypto company Ripple Labs, wasn’t a security when it was sold to the public on a crypto exchange. And in June of this year, the S.E.C. closed an investigation into Ethereum, the second-biggest blockchain network after Bitcoin. But, in the main, the agency had made progress in the courts. “People in the crypto industry are doubling down on political contributions,” Dennis Kelleher, the president of the public-interest group Better Markets, told me. “They can see the trend of losing to the S.E.C. in court. The legal walls are closing in, and they want Congress to say digital assets are not securities, so the S.E.C. has no jurisdiction over them. That’s the big ask.”
The scale of crypto-industry donations is startling. According to Bloomberg, three crypto super PACs, including the biggest one, Fairshake, have raised a hundred and seventy million dollars from donors including Coinbase, Ripple, and the venture-capital firm Andreessen Horowitz. The flood of crypto money isn’t just going to Trump’s Presidential campaign. It’s also going to House and Senate campaigns. And whereas most of it seems likely to be directed at defeating Democrats who have been critical of crypto, including Senator Sherrod Brown, of Ohio, and Senator John Tester, of Montana, some is also going to other Democrats.
In a primary election last week in Arizona’s Third Congressional District, Yassamin Ansari, a Democratic member of the Phoenix city council, whose campaign had been boosted by ads paid for by a crypto super PAC, defeated Raquel Teran, a former chair of the state Democratic Party. Given all the crypto cash that is sloshing around, it may not be a coincidence that more than a dozen House Democrats recently signed a letter to Jaime Harrison, the chair of the Democratic National Committee, asking the committee “to take a forward-looking approach to digital assets and blockchain technology.” It remains true, however, that the crypto industry’s biggest political boosters are Republicans.
After Trump’s appearance at the recent Bitcoin conference, Senator Cynthia Lummis, of Wyoming, announced that she is proposing legislation to establish a “strategic Bitcoin reserve,” made up of about a million bitcoins. (Robert F. Kennedy, Jr., another crypto booster, is also advocating for this.) Again, there is comedic value here. The crypto bros, many of whom style themselves as libertarians, often argue that one of the great things about Bitcoin is its independence from governments. Here comes a Republican senator proposing to spend more than sixty billion dollars of taxpayers’ money (given the current price of bitcoin) to acquire about five per cent of the entire stock of the cryptocurrency.
