The Many Ways Crypto Won in This Election

Trump has been avowedly pro-Bitcoin and pro-crypto for a minute now. In fact, he’s more of a degen than many of us, having launched his own DeFi protocol, World Liberty Financial. The official Republican platform is explicitly pro-crypto, and Trump himself has made specific commitments to the industry, like freeing Ross Ulbricht, ending SEC Chair Gary Gensler’s reign, letting Bitcoin miners mine, ending Chokepoint 2.0, and having the government hold on to all seized BTC.

People are policy, and Trump surrounds himself with an orange-pilled group. VP-elect JD Vance owns Bitcoin, and has a long track of engagement with crypto, even authoring a market structure bill as a senator. Vivek Ramaswamy, the new co-lead of the Department of Government Efficiency (DOGE), has been a crypto bull for some time. Trump’s transition team co-chair Howard Lutnick is a bitcoin and stablecoin megabull (his company Cantor Fitzgerald custodies for Tether). Musk himself, who is becoming a right-side Soros of sorts, has dabbled in crypto for years.

By all accounts, Jared Kushner, Trump’s sons Don and Eric, and Barron are all crypto curious at least. RFK Jr, who may yet find a role in Trump’s cabinet, is beloved in the Bitcoin community. Trump’s rumored Treasury secretary nominee, Scott Bessent, openly supports crypto and Bitcoin. And Tulsi Gabbard, newly minted head of National Intelligence, owned ETH and LTC all the way back in 2018. Even those who suspect that Trump is merely paying lip service to crypto must admit he has surrounded himself with people who have invested in the industry’s future.

The election was also a spectacular success for the crypto lobby. On November 8, Bloomberg reported that FairShake, the industry’s largest Super PAC, prevailed in 48 of 48 races in which it backed a candidate (Fairshake backed both Democrats and Republicans). Coinbase’s Stand With Crypto aggregator claims that 273 pro-crypto and 122 anti-crypto Representatives were elected this cycle.

On the Senate side, they list 19 pro-crypto and 12 anti-crypto candidates elected. Most notably in the Senate, the crypto lobby threw an avalanche of cash at Bernie Moreno to help him unseat Democrat Senator Sherrod Brown in Ohio. Brown was the chair of the Senate Banking Committee and a staunch opponent of crypto. Moreno, by contrast, is a crypto entrepreneur himself. In Montana, Republican Tim Sheehy (“A” grade on Stand with Crypto) defeated Senator Jon Tester (“D” grade on Stand with Crypto).

Although we don’t know the exact size of the crypto single-issue voter bloc, it’s undoubtedly the case that crypto helped swing some of these races, helping Republicans retake the Senate and keep the House. Newly minted Senate leaders John Thune and Tim Scott have both spoken favorably of crypto in the past.

In the New Year, we can expect the first priority to be a stablecoin bill (although the details are still being negotiated), followed by a market structure bill. Trump could create a Strategic Bitcoin Reserve with an executive order, or Congress could create a new federal facility for this.

Tether is a huge winner from the election. This was kind of an unexpected blessing for them, since they weren’t known to have participated in the electoral cycle at all nor were they listed as donating to any super PACs. (As a foreign entity, they would have been prohibited from doing so.) Howard Lutnick, the CEO of Cantor Fitzgerald, which custodies a large share of Tether’s Treasury portfolio, is a huge Tether bull. He is also the co-chair of Trump’s transition team and even threw his name in the hat for Treasury Secretary. Lutnick deeply appreciates the value proposition of stablecoins like Tether.

The biggest threat to the $125 billion stablecoin issue is regulatory or law enforcement action, with the DoJ reportedly investigating them yet again. Due to a barrage of negative press coverage, Tether was never going to be fully in the clear. Although no one really worries about their reserves any longer, associations with illicit finance continue to plague it. Lutnick’s close relationship with Trump represents a meaningful political bailout for the stablecoin. You know that somewhere in the Bahamas, an Italian named Paolo was clinking champagne flutes on election night.

DeFi also looks to gain from the election. At the moment, the industry suffers from a regulatory paradox. Every feature that makes tokens worthwhile to hold – cashflows accreting to holders, real governance rights, and so on – also makes them more like securities legally speaking. This has forced founders to tread a delicate path between making the token attractive and trying to avoid the dreaded security designation.

This is ultimately an impossible path. Many of these tokens resemble a form of pseudo-equity and should be treated as such. Now as SEC chair Gensler looks to be on his way out, the SEC looks poised to install a regulatory framework to treat these tokens as pseudo-equity requiring light-touch disclosure for investors. This would level the playing field and make the DeFi space fairer for investors, while allowing founders to treat the tokens more like protocol equity.

The market is anticipating this, as DeFi names are already catching a bid. I expect that this flight to quality will continue over the coming months as the SEC’s agenda for tokens crystallizes.

Crypto people often think that it’s crypto versus the banks. But the contrary is the case. Banks have been trying to get into the crypto space for a long time, although they have been largely walled off from serving the industry. SEC rule SAB121 has meant that banks holding crypto on behalf of clients have to hold it on their balance sheet, making such custody models prohibitively expensive.

In 2023, the Fed warned banks not to do business with stablecoins. And of course, banks have been discouraged from serving crypto clients by the FDIC, OCC, and Fed. This has been dubbed “Operation Choke Point 2.0.” Even today, after Chokepoint 2.0 has been exposed, the FDIC is insisting that banks offer no more than 15% of their depository base to crypto firms. Many banks would like to bank crypto firms but simply cannot.

Meanwhile, foreign banks are feasting, getting involved in crypto custody, exchange, stablecoin/FX brokerage, and even issuing stablecoins themselves. U.S. banks have been left out.

This is all likely to change under Trump. We know SAB121 will go away whenever Trump forces SEC chair Gensler out. Although Congress passed a SAB121 overturn (which was subsequently vetoed by Biden), no such bill will be necessary when SEC leadership turns over. SAB121 was imposed by fiat, and it can be eliminated with the stroke of a pen by Gensler’s successor. So banks will be free to custody crypto.

Chokepoint 2.0 will undoubtedly end, as Trump appoints a new Comptroller and FDIC Chair. Banks will be at liberty to serve crypto firms to their pleasure. Whether banks will be allowed to issue or transact with stablecoins remains an open question.

Lastly, prediction markets were huge beneficiaries of the election, having performed exceptionally well. Polymarket was far sunnier on Trump’s (and general Republican) prospects than most of the pollsters, and called a number of races long before the pundits and MSM did. Aside from stablecoins, prediction markets appear to be the first meaningful breakout consumer product built on crypto. Finally, a use case. Prediction markets do outperform the polls and the press, and they will be a defining feature of political life for years to come.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.