Biden’s disputed presidency or Trump’s unlikely second term: What each means for digital assets
The US election results are in, but not quite. Although Biden has been declared the President-elect of the United States, the Trump administration is contesting key states for alleged voting fraud from mail-in ballots. Until the situation resolves itself, it is hard to tell what might happen in the events leading up to the presidential inauguration on January 20th – whether Joe Biden will swear in as the new President or Trump will move forward into a second term. Nonetheless, let’s have a look at what the next four years may look like for the cryptocurrency landscape of the two presidential rivals.
Biden’s curious history with encryption
Biden hasn’t said much about cryptocurrency in the past. Yet, he might be indirectly responsible for the foundations of our current model of digital encryption. In 1991, Senator Biden proposed two bills, Comprehensive Counter-Terrorism Act and Violent Crime Control Act, which promoted stricter anti-encryption laws in the digital sphere. The statements allegedly inspired cryptographer Phil Zimmermann to create Pretty Good Privacy (PGP). This encryption software allows peer-to-peer data communication with private authentication and no central storage of data. “When Biden’s bills hit we knew we had to change the facts on the ground,” Zimmermann stated in a Wired interview. His PGP software is considered by many researchers as the kickstart to private email usage and perhaps as inspiration for the creation of blockchain itself.
Biden called as president, is he also crypto-friendly?
Although the election results are currently being disputed, let’s analyse it with the most likely scenario that Biden is indeed the next president of the United States. What will his administration mean for digital assets?
His team might say a lot about what his future government may look like for the crypto industry. For instance, Biden picked Gary Gensler, former CFTC chairman, to lead his financial policy transition and for a potential senior position in the administration. Gensler is openly optimistic about cryptocurrencies, testifying before Congress on their positive features and against the narrative that digital assets are akin to illicit ventures. His presence in the new administration will most likely be positive for the crypto landscape.
Current Fed Reserve governor Lael Brainard has also been speculated as Biden’s favourite pick for Treasury Secretary, considered an extremely knowledgeable governor in the topic of cryptocurrencies. She believes the Federal Government should seek to understand and research cryptocurrencies, and to strive forward towards “healthy innovation” of digital transactions.
On a more speculative note, Biden’s campaign was openly critical of the upper-class and Wall Street wealth. His administration proposes a 62% tax rate for individuals making more than US$400,000a year and Gary Gensler himself, his biggest crypto enthusiast, has an aggressive stance for more banking regulations and proposes a much tighter leash on the stock market. If Biden’s proposals prove successful, we will potentially see a transition of significant wealth away from the dollar, with growing interest in bitcoin and other digital assets as a hedge against centralisation and further regulations.
Trump’s brief history with crypto
Since he’s the incumbent of this disputed election, we first need to have a quick look into his stance on crypto for the past four years of his administration. What has his presidency done for digital assets over this period?
Firstly, it’s inevitable to mention Trump’s administration without the Initial Coin Offering (ICO) boom of 2017, when the rollout of new cryptocurrencies grew 100 fold, and bitcoin’s price peaked at a price of roughly US$20,000, before crashing to US$6,000in under a month. His 2016 election win was reinforced by strength in the stock market, and growing excitement for cryptocurrencies. It is vital to note that the immense rise in ICOs during 2017 was not necessarily flattering for the cryptocurrency landscape; it diverted the focus from a a hedge against centralised finance into highly-speculative assets, filled with sensationalist marketing, many with very little value. Although it brought awareness of the space to a whole new level, it also caused new adopters to lose a lot of money and subsequent trust in decentralisation.
In his first term, Trump mentioned cryptocurrencies a few times. In a nutshell? He is not much of a fan. During a White House conference in July 2019, while criticising Facebook’s currency project Libra, Trump stated that cryptocurrencies are “not real money”. He later tweeted that same statement, which significantly spiked the volume in bitcoin’s activity. Trump has also viewed cryptocurrencies as a threat that allegedly promotes criminal activity, illegal transaction and tax evasion. Despite his views, his recent countermeasure proposals will actually help digital assets a great deal when it comes to federal policy frameworks in the US.
In our article on digital asset policies, we covered where key countries stand on their development of policies on digital currencies, including the US. The government doesn’t have a federal framework on how to label or regulate cryptoassets. That seems close to a change with a bill proposal – the Digital Commodity Exchange Act of 2020. Released under Trump’s administration a couple of months ago, the bill seeks to create a federal framework which allows exchanges to operate freely in the entire country instead of complying to each state according to their regulations. The bill came seven months after Treasury Secretary Steven Mnuchin said that the administration was close to rolling out some “significant new requirements” for cryptocurrencies.
What a (disputed) second term means
As the election controversy unfolds, and some of his own administration begin to oppose his claims of voter fraud, the chances of Trump winning his dispute seems increasingly unlikely. Regardless of how the investigation stands at the moment, anything can still happen, so here’s what a second term for Donald Trump means for crypto.
Even as someone who is “not a fan of crypto”, the space grew tremendously during his administration, through usage and adoption in the US.. He’s had some advocates in his team, the most widely known is Hester Peirce, commissioner of the US Securities and Exchange Commission (SEC),affectionately nicknamed “Crypto Mom”. She has often criticised SEC’s anti-crypto stance and has proposed better regulations for crypto exchanges. Her intentions might actually come to fruition with the previously mentioned bill proposal, which emerged through Trump’s request to tackle the lack of federal regulation on the crypto industry. The intentions were not positive, but they might result in more accessible rules for exchanges all over the US. In fact, America recently became home to the very first crypto exchange to receive institutional banking approval; Kraken Exchange, with their upcoming Kraken Financial headquarters in Wyoming.
With the election results being contested in court, it might still take a while until we have a clear sense on who’s getting the job in the January 20th inauguration. In any case, considering Trump’s recent history with digital assets and Biden’s administration team being formed, it shows that the progress for the currencies in the US is somewhat inevitable. Biden is not intentionally assembling his government officials because of their stance on cryptocurrencies; it’s rather an effect from increasing recognition from financial experts in high positions of leadership. Even Trump’s direct distaste for cryptocurrencies resulted in better federal awareness and the development of vital frameworks for national recognition. It doesn’t seem to matter who is going to be president in the next four years; cryptoassets will maintain the path towards broader adoption and recognition of their benefits.