Home / In an Election Year Will Crypto Sway the Republican vs. Democrat Debate?
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In an Election Year Will Crypto Sway the Republican vs. Democrat Debate?

Published June 15, 2023 11:46 AM
Darryn Pollock
Published June 15, 2023 11:46 AM

Key Takeaways

  • U.S. Republicans want the SEC to scrap proposed changes to exchange definition
  • A stabilization act intends to overhaul the SEC’s structure
  • Party lines split over crypto vs. CBDC narratives

The fate of the American cryptocurrency industry is tethered to the neverending conflict between Republicans and Democrats, with either party at odds over how to regulate the burgeoning industry.

Pro-crypto Republicans continue to advocate for more lenient policies towards the sector while Republicans have played their part in a series of separate but connected moves that have seemingly looked to curtail the use of cryptocurrencies and related operations of exchanges in the country.

A number of notable Republicans and Democrats are at the coal-face of the ongoing cryptocurrency debate and their respective policies could hold sway in the outcome of the U.S. presidential election in 2024.

Republicans take the fight to Gensler’s SEC

Republicans from the House Financial Services Committee wrote  to the Securities and Exchange Commission on June 13 imploring the agency to scrap a proposed change to the definition of an exchange under its remit.

The SEC published a proposed rule change that intends to change the definition of an exchange to include systems offering ‘non-firm trading interest and communications protocols’ that connect buyers and sellers of securities. The change would bring cryptocurrencies exchanges firmly under the purview of the SEC.

Patrick McHenry and French Hill, chairman and vice-chairman of the House Committee on Financial Services, accused the SEC of ‘attempting to front-run Congress’ while the committee is actively working on legislation to establish a market structure for the crypto industry:

“The Proposed Rule seeks to shoehorn technology that operates fundamentally different into decades old rules for those traditional platforms. This will have significant effects on further development in the space.”

The letter was delivered on the same day that Republican congressman Warren Davidson and House Majority Whip Tom Emmer introduced a proposed SEC Stabilization Act  which would effectively remove current SEC chair Gary Gensler and restructure the organization.

The plan would adjust the SEC to include a sixth additional commissioner, while creating an Executive Director role that oversees the agency’s operations. The change would also even out what Emmer and Davidson described as a ‘concern level of discretion’ afforded to the chair of the SEC which effectively leaves the other four commissioners redundant when it comes to rulemaking, enforcement and investigative actions.

Emulating the structure of the Federal Election Commission, the SEC Stabilization Act also aims to ensure that no political party in the U.S. holds more than three commissioner seats to avoid politicized agendas.

Gensler has served in various governmental positions since the 1990s and is an active member of the Democratic party. The current SEC chair has copped widespread criticism for his ongoing enforcement actions against cryptocurrency exchanges and view that many cryptocurrency tokens operate as securities and should fall under the regulatory purview of the SEC.

Crypto proponents

2024 Republican presidential candidate and Florida governor Ron DeSantis is another member of the Good Old Party who’s putting his weight behind crypto-friendly rules and regulations.

DeSantis grabbed headlines after a Twitter broadcast  with Elon Musk in which he vowed to ‘protect the ability to do things like Bitcoin’ if he was to become U.S. President. DeSantis also hit out at the current administration’s efforts to curtail the cryptocurrency industry due to a lack of control over the sector.

The Florida governor also added that the current Biden administration could well trample the American cryptocurrency ecosystem if their current regulatory regime for the space continued.

DeSantis has also taken steps to curb potential governmental overreach through the issuance of central bank digital currencies (CBDCs), signing a bill into law restricting their use in Florida. 

Texas senator Ted Cruz, who won’t be in the running for the presidency in 2024, has also made moves to prohibit the Federal Reserve from issuing a direct-to-consumer CBDC in March 2023 . His main argument is that the state could use CBDCs as a financial surveillance tool:

“This bill goes a long way in making sure big government doesn’t attempt to centralize or control cryptocurrency and instead, allows it to thrive in the United States.”

Biden’s pro-CBDC administration

Former U.S. Deputy National Security Advisor Daleep Singh recently revealed that the Biden administration was actively working towards the issuance of a CBDC from 2022 onwards.

Speaking in the U.S. Senate Banking Committee hearing in March 2023 , Singh said that an executive order issued by Biden in 2022 aimed at regulating the cryptocurrency sector and stifling the use of stablecoins. 

Efforts to push the U.S. government to issue a digital dollar would ‘crowd out’ the wider cryptocurrency ecosystem in the country and curtail sanctions violations and improve national security.

Biden himself has courted controversy with the cryptocurrency ecosystem, claiming many cryptocurrencies have no fundamental value in his presidential economic report published  in March 2023.

Biden also grabbed headlines after hitting out at proposed U.S. debt ceiling deal which prompted the current president to hit-out at cryptocurrency users in May 2023 :

“I’m not going to agree to a deal that protects wealthy tax cheats and crypto traders while putting food assistance at risk for nearly one million Americans.”

Youth of the Nation

Influential Democrats that have taken a stern stance towards the cryptocurrency sector could stand to alienate younger Americans when they cast their votes in 2024.

The Winklevoss twins, who co-founded American cryptocurrency exchange Gemini, went as far as saying that Gensler’s ‘war against crypto’ could ‘alienate an entire generation of would-be Democrats.’ 

Their take also hit out at efforts by Massachusetts senator Elizabeth Warren to drive  a Digital Assets Anti-Money Laundering Act which seeks to criminalize the use of cryptocurrency mixers and require the use of self-custody wallets, among other requirements.

Crypto-savvy American voters will no doubt be thinking very carefully about where to cast their votes in 2024. That’s if the sector can survive the SEC’s efforts to clamp down on exchanges and alleged securities violations that have hammered the U.S. cryptocurrency ecosystem in 2023.