Post-Election, Crypto Industry Anticipates More Supportive Government

Leading cryptocurrency asset managers such as Bitwise and Canary Capital are developing new offerings in anticipation of a political climate more receptive to cryptocurrencies. Meanwhile, companies like Ripple are gearing up to advocate for cryptocurrency-focused legislation with the incoming Congress, according to industry executives and legal experts.

“No matter the election outcome, there’s going to be a fresh strategy for progressing with cryptocurrency,” stated Rebecca Rettig, the chief legal and policy officer at Polygon Labs, a crypto-focused firm.

Republican contender Donald Trump has vowed to be a “crypto president,” and it’s anticipated that Vice President Kamala Harris, representing the Democrats, would adopt a more lenient approach than the current administration under Biden.

While Harris has yet to unveil specific plans regarding cryptocurrencies, her commitments to foster innovation in digital assets and enhance protections for cryptocurrency investors have been well received by industry leaders.

Mark Cuban, a billionaire and crypto proponent who supports Harris, has voiced criticism against the current administration’s stringent crypto regulations under SEC Chair Gary Gensler, appointed by Biden.

Gensler has portrayed the crypto sector as a hazard to investors, citing the FTX collapse and several other failures and fraudulent activities that have sparked demands for stricter regulations. The crypto market has been markedly unstable since the introduction of Bitcoin in 2009.

The SEC under Gensler has initiated numerous enforcement actions against entities like Coinbase and Kraken, claiming they have breached U.S. securities laws which are designed to alert investors to potential dangers.

The accused firms have refuted the SEC’s claims, arguing that cryptocurrencies, which boast a global market cap near $2.5 trillion, should be regulated as commodities.

Gensler, set to remain in his position until 2026, has not indicated any shifts in his stance on cryptocurrency. While Trump has stated he would dismiss Gensler if elected, Harris has not suggested any intentions to replace him. The SEC declined to comment on the matter.

Trump’s pro-bitcoin stance has garnered him substantial support from major crypto donors like Gemini’s founders Cameron and Tyler Winklevoss. Chris Larsen, chairman of Ripple, has also made significant financial contributions to Harris’ super PAC, and newly formed crypto groups with Democratic leanings have been actively fundraising for her campaign.

Ripple, Coinbase, and other firms have invested over $119 million in supporting congressional candidates favorable to crypto, per data from Public Citizen. These companies aim to forward legislation that would mainstream stablecoins, which are crypto tokens tied to the value of the U.S. dollar.

“This election is about backing candidates who understand the importance of supporting innovation in America, not just picking a side,” commented Lauren Belive, head of U.S. policy at Ripple.

Coinbase, which just announced an extra $25 million donation to a pro-crypto PAC, did not respond to requests for comments.

Crypto thaw?

Crypto executives are hopeful that under Harris, the SEC might reconsider, or even revoke, the guidance that mandates public companies to record crypto assets held for others as liabilities due to their associated risks.

This guidance, known as “SAB 121,” is particularly problematic for the industry.

Since stringent capital requirements force banks to maintain cash reserves against liabilities, many financial institutions have hesitated to engage with cryptocurrencies. If consumers could deposit their cryptocurrencies with reputable banks, usage and popularity of digital assets might increase, industry leaders argue.

Congress passed a bipartisan resolution in May to repeal SAB 121, but it was vetoed by President Biden.

“With the recent bipartisan backing… I’d expect that no matter who becomes the next president, SAB 121 will be overturned,” predicted David Mercer, CEO of LMAX Group, a company that operates a cryptocurrency exchange. “This could significantly accelerate the entire crypto market.”

Last month, the SEC’s chief accountant stated that SAB 121 does not apply under certain conditions. Following this, the agency allowed BNY to custody cryptocurrencies for exchange-traded products without classifying them as liabilities. In an interview with Bloomberg, Gensler noted that other banks could follow this model.

“Both presidential candidates clearly recognize the beneficial economic potential of digital assets,” noted Sui Chung, CEO of Kraken subsidiary CF Benchmarks, citing the BNY decision as evidence of a changing political landscape.

After a legal setback, the SEC has approved ETFs for Bitcoin and Ethereum this year. Bitwise and Canary Capital have recently submitted SEC applications to launch similar products based on Ripple’s XRP token.

“We believe that, regardless of who wins the election, the crypto markets will face a more favorable regulatory environment under the new administration next year,” a spokesperson for Bitwise remarked.

With the SEC having until mid-2025 to make a decision on these applications, they are seen as a wager on a more supportive regulatory climate, according to industry leaders. “These filings are essentially an investment in that anticipated change,” Chung explained.

“Canary continues to witness promising signs of a progressive regulatory landscape,” a company spokesperson stated, adding that this optimism is boosting investor interest in accessing a wider array of cryptocurrencies beyond just Bitcoin and Ethereum.