As the 2024 U.S. presidential election draws closer, the cryptocurrency industry is ramping up its lobbying efforts, seeking to capitalize on the possibility of a political shift that could benefit its goals. The digital asset sector, which has long navigated a regulatory minefield, is now focusing its attention on former President Donald Trump and his political allies, hoping to influence future policy decisions that could foster innovation and investment in crypto.
Since leaving office, Trump has been an outspoken critic of some aspects of the current administration’s regulatory stance on cryptocurrencies, and several of his allies in Congress have become champions of the industry’s push for more favorable rules. As the crypto industry faces increasing scrutiny from regulators, particularly the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), its leaders are now looking to align themselves with political figures who may offer more lenient approaches to oversight and legislation.
Crypto Lobbying Shifts to Republican Allies
In recent months, top executives from leading cryptocurrency exchanges, blockchain technology firms, and fintech companies have been quietly meeting with senior figures in Trump’s inner circle, Republican lawmakers, and conservative policy groups to discuss ways to create a more crypto-friendly environment. These lobbying efforts are seen as an attempt to secure policy wins that would help the industry thrive in a potentially pro-business, pro-innovation regulatory landscape under a second Trump administration.
“Cryptocurrency represents the future of finance, and we need regulatory clarity and support to grow,” said Michael Novogratz, CEO of the cryptocurrency investment firm Galaxy Digital. “We are actively working to ensure that a pro-crypto agenda takes hold, and there’s a growing recognition that the Republican Party, with its emphasis on free-market principles, is more aligned with the needs of the industry.”
The crypto industry’s new lobbying push is part of a broader strategy to create a political environment that prioritizes innovation while minimizing overbearing government intervention. This is a marked shift from the previous administration, which saw increased regulatory scrutiny, particularly in the wake of major scandals like the collapse of FTX and the bankruptcies of other high-profile crypto firms. Now, crypto leaders are looking toward a potential Trump return to power as an opportunity to reset the regulatory landscape.
Trump’s Support for Crypto Regulation Reform
Former President Trump, despite his controversial rhetoric on various issues, has historically shown a willingness to embrace certain sectors of the technology and financial industries. His administration was relatively hands-off when it came to crypto regulation, with the exception of tackling illicit activities such as money laundering and fraud. Trump has also made remarks about the potential of digital currencies, suggesting they could play a role in reshaping the financial system if appropriately regulated.
In a speech earlier this year, Trump remarked that the government should “get out of the way” of emerging technologies, including blockchain and crypto, in order to allow the U.S. to remain competitive globally. His statements resonated with many in the crypto community, who see Trump as a potential ally in their fight against what they consider the overreach of federal agencies like the SEC and the CFTC.
Moreover, Trump’s camp has also taken aim at some of the key players in the current administration, accusing them of stifling innovation through heavy-handed regulation. In particular, Trump’s allies have been critical of SEC Chair Gary Gensler, who has pursued a series of enforcement actions against crypto companies, as well as efforts to classify various digital assets as securities, which would subject them to stricter oversight.
“Under Biden, we’ve seen an attack on innovation, and it’s hurting American competitiveness,” said Rep. Patrick McHenry (R-NC), who has become one of the leading voices in Congress advocating for a more balanced approach to crypto regulation. “We need a framework that encourages innovation while protecting consumers, and that’s exactly what we can expect from a second Trump term.”
The Industry’s Lobbying Blitz
In addition to working closely with Trump’s campaign, the crypto industry has been expanding its lobbying presence on Capitol Hill. The Blockchain Association, the largest crypto industry trade group, has tripled its lobbying budget this year, spending millions on ads, grassroots efforts, and direct lobbying of key policymakers. Other industry groups like the Crypto Council for Innovation and the Digital Chamber of Commerce have also significantly ramped up their advocacy efforts.
Lobbyists have focused on a range of issues, including the classification of digital assets, taxation policies, and the establishment of a clearer regulatory framework that distinguishes between cryptocurrencies and traditional financial products. The crypto industry is particularly keen on avoiding the kinds of crackdowns that have hurt other tech sectors in the past, such as those faced by the cannabis or tech industries in the wake of regulatory uncertainty.
One of the most significant areas of focus for crypto lobbyists has been the classification of certain digital assets as securities. The SEC has taken an increasingly aggressive stance in attempting to regulate various cryptocurrencies, including Ethereum and other tokens, as securities under the Howey Test, a 1946 Supreme Court ruling that established the criteria for what constitutes an investment contract. Industry leaders argue that many cryptocurrencies do not meet the criteria for securities and should be treated as commodities instead.
“The SEC’s current approach is creating uncertainty in the marketplace,” said Kristin Smith, executive director of the Blockchain Association. “If we have a more predictable and transparent regulatory framework, we can foster innovation while ensuring consumer protection. That’s what we’re fighting for, and we believe Trump’s platform is more aligned with that goal.”
A Pro-Crypto Regulatory Vision
Should Trump and his allies win the 2024 election, the crypto industry hopes to see sweeping changes in the way digital assets are regulated. Key priorities for the industry include:
- Clearer Classification of Cryptocurrencies: Advocates want to see a clear distinction between cryptocurrencies, which they argue should be treated as commodities like gold, and security tokens, which could be regulated by the SEC. They also want to avoid the SEC’s “overreach” into the crypto space and push for a more hands-off approach to innovation.
- Taxation Reform: The crypto industry has expressed concern over the IRS’s treatment of digital assets, particularly in terms of capital gains tax and reporting requirements. Many in the industry have called for a more lenient tax treatment for crypto transactions, particularly for smaller investors.
- Central Bank Digital Currency (CBDC) Regulations: The rise of CBDCs, or government-backed digital currencies, is another hot topic. While some in the crypto industry see CBDCs as a potential competitor to decentralized cryptocurrencies, others believe that clear guidelines surrounding their development will help prevent overreach while encouraging healthy competition in the digital currency space.
- Regulatory Clarity and Protection for Institutional Investors: As institutional interest in crypto continues to grow, there is a push for clearer regulations that allow large firms to participate in the crypto market without fear of sudden policy shifts or enforcement actions.
Potential Risks of Crypto’s Political Influence
While the crypto industry’s efforts to court Trump and his allies have gained traction, there are risks associated with a potential regulatory environment that is overly permissive. Critics warn that a lack of regulatory oversight could lead to the same kind of market volatility, fraud, and consumer abuse that has plagued the industry in recent years.
“While we understand the desire for a pro-crypto regulatory environment, we also need to be mindful of consumer protection,” said Sen. Elizabeth Warren (D-MA), a vocal critic of cryptocurrency’s environmental impact and its use in illicit activities. “We cannot allow the digital asset market to operate unchecked, and we must ensure that investors and consumers are protected.”
For now, the future of cryptocurrency regulation hangs in the balance. With the election just around the corner, the crypto industry’s growing influence in Washington is sure to shape the future of digital assets in the U.S. How far Trump and his allies are willing to go in embracing the industry’s demands remains to be seen, but it’s clear that the crypto world is ready to seize on any political shift that could help it expand and thrive.
As one crypto lobbyist put it: “We know that Washington is watching, and we’re making sure they know that cryptocurrency isn’t going away. We’re here to stay, and we’re ready to work with whoever is in charge to create a future that benefits everyone.”