Democrats Have Miscalculated Badly on Crypto
The Biden administration can be accused of making many missteps in what may still be a close presidential election. One of their most costly could end up being their hostility to the enterprise blockchain industry and its innovations with cryptocurrencies and digital assets.
The industry, which has the potential to add significant value to an economy, has struggled under the current President. Over the last four years, the Securities and Exchange Commission (SEC) under chairman Gary Gensler has set aside the rule of law and chosen to repeatedly engage in the kinds of lawfare we have unfortunately come to expect from the Biden Administration, by targeting the crypto industry through wildly overreaching lawsuits and behavior that federal judges have condemned as arbitrary and capricious. Meanwhile, Gensler’s chief ally, Senator Elizabeth Warren (D-MA), is campaigning for re-election by raising “an anti-crypto army” and promising to severely limit or even ban the technology.
But while the crypto industry has traditionally leaned Democratic in their support of federal candidates, such anti-crypto crusades undertaken by leading Democratic figures have left them, and the many American voters who see the technology as a key innovation for the future, rethinking their support for the party that supports such regressive policies. The July 2023 victory of crypto giant Ripple in a lawsuit brought by the SEC that exposed the inconsistent and incoherent regulatory enforcement the agency has been engaging in, has also shifted momentum decisively in favor of the industry.
Since then, another federal court forced Gensler to explain why he kept rejecting Bitcoin spot ETFs, and he couldn’t so he had to approve them. Biden’s Treasury Department caught Warren stretching the truth about crypto being a tool of terrorists like Hamas and had to correct her in public. Then a Utah federal judge ruled that the SEC had lied to the court in falsely alleging fraud by the crypto company Debt Box, leading to $1.8 million in sanctions against the agency for its “gross abuse of power.” The scandal led the SEC to close its Salt Lake City office.
Now even some fellow Democrats have started openly challenging Gensler and Warren over their crypto policies. Warren’s “army” fell apart when leading Democrats abandoned her and the Biden Administration in back-to-back Congressional votes in May. First, the Senate repealed an anti-crypto SEC staff bulletin by a wide, bipartisan margin, and then the House voted overwhelmingly to strip Gensler of his authority to regulate crypto assets and hand it over to the Commodity Futures Trading Commission. Senate Democratic Leader Chuck Schumer (D-NY) and former Speaker Nancy Pelosi (D-CA) were among the Democrats who broke with Warren, Gensler and Biden on both votes, making it clear they are fighting a losing battle.
But it all may be too little too late. In what may be the crypto-related development with the biggest implications for the 2024 election cycle, several leading companies have launched Fairshake, a SuperPAC with a nearly $80 million war chest to support leaders who endorse crypto and blockchain both in the forthcoming U.S. presidential election and key Senate races.
Among the top funders include Ripple, whose hard-fought court victory against the SEC cost the company $100 million. CEO Brad Garlinghouse recently told Politico that he thought Democrats have “grossly miscalculated how they have engaged on this topic” of crypto regulation and has promised Ripple will be a top funder to Fairshake every year going forward, sending clear messages that SEC Chairman Gary Gensler is a “political liability.” Democrats are now in a bind in several Senate races where Fairshake is spending heavily to try and move their embattled incumbents to the middle on crypto policy.
Republicans, including Donald Trump, conversely have seen the growth of and partnership with the crypto industry as an opening and have run with it. Trump announced his support for crypto and recently held a lavish fundraiser in Silicon Valley. He was warmly received by former Biden supporters who have been on the receiving end of Gensler’s legal onslaught and Warren’s tirades for years and have had enough. Furthermore, the selection of J.D. Vance – a former venture capitalist with experience supporting crypto entrepreneurs – as Trump’s running mate has further illustrated this policy divide.
Such sentiments reflect the extent of how badly the Democrats misread the issue when they went after companies like Ripple and the crypto industry more broadly. Some industry leaders were already lost on Biden and the Democrats before the president’s disastrous debate performance in Atlanta, and the party as a whole is now bearing the political cost of being wrong on the law, wrong on the facts and wrong on the regulatory overreach against crypto.
Recent polling and demographic trends suggest a seismic shift is underway and that traditional Democratic constituencies are abandoning the party in droves. At least in this instance it looks like a key segment of the tech sector may be following suit. The crypto industry has finally woken up to the fact that voting Democratic may not be in their best interest and appears to be acting on it.
Todd Tiahrt is a former Member of Congress who served on the House Appropriations Committee which oversaw the funding of the Security and Exchange Commission.
